Scanning Stocks for Nicolas Darvas Style Breakouts

I think that my strategy of buying stocks making new 52 week highs or all time highs works for any market, but what makes the stock market different from other markets is that, unlike the Forex or commodity markets, there are thousands of stocks to choose from.

With so many stocks to choose from, I rely heavily on scans to narrow down a universe of about 10,000 stocks to a more manageable number.

I use Stockcharts.com to perform my scans and there are five scans that I go through, which I will summarize below:


1) Breaking out of consolidations to new 52 week highs: 


The chart above shows an "ideal" example of what I am looking for.   The scan looks for stocks that have been consolidating for the past 4 weeks or longer and are now trading at a new 52 week high.



2) Above average weekly price advances: 


Because I believe that strength tends to beget more strength, I scan for charts that display bullish, tall, weekly candles.



3)  Volume scan #1:


When I buy a stock, I have little or no knowledge of what product or service the company provides.   However, if you follow volume patterns, you can end up trading with the smart money anyway.



4)   Volume scan #2: 



This scan looks for stocks whose volume is significantly higher this week than last week.



5)   Volatility Contraction scan: 



This scan looks for a major decline in a stock's volatility as measured by bollinger band width.    Often, volatility for a stock will decline before a major explosive move.

If you are interested in creating your own scan with Stockcharts.com, but are uncertain as to how to code it up, please contact me.





Posted by at