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Stock Screener Software: What Techniques Work?

29 April 2011 No Comment

Stock screener software is applied to analyze a large amount of stock intelligence to identify the key information you must have in a very short time frame.  Software companies provide multiple applications of this tool from technical filters to price-volume patterns, including event driven screening. Below are a few ways they are used:

Many people use the stock screener software to filter for stocks that split inversely.  Assume our intent is to sell short shares where the stock has a reverse split e.g. 3 for 4 shares). Normally this can happen if the company’s prospects appear bad and they’re below the lowest price acceptable on the stock exchange to stay listed as a publicly held stock.  Should you believe the market has a bad opinion of the company’s future, then it may be a good moment to sell short the shares.  In this strategy, the smart trader should screen for inverse splits.  Just enter a filter such as “number of shares on the market at this moment is lower than one-half times shares available to trade 3 days in the past.” This will search for stocks that completed a reverse split of at least 1 to 2 in the last week

Filter by volume vs. price pattern.  Let’s say your method is to acquire beaten down shares which have created a clear bottoming pattern in prices and exhibit big market investors accumulating.  The idea is to buy in early along with the big institutions before the price starts getting higher.  You can create a screen with this logic: price is lower than 4 days ago and price is higher than or equal to the close of the last 20 weeks and weekly volume is higher than 3 times average weekly volume over last 12 weeks.  The stock screener software should find stocks that have stopped their down trend and have high volume in the last week, which may show big buying interest.

Filtering for balance sheet and revenue expansion.  If you are a cash flow oriented value investor like Berkshire Hathaway, it is possible to create a highly useful screen.  Build a rule which says “locate stocks with debt to equity proportion under 2 and typical cash flow growth over the last three periods of no less than 5%.”  The screener will isolate conservative businesses in a steady leverage situation with rising free cash flow.  From this screen you can then filter more to discover businesses with growing cash from operations and maybe discover a few superb value opportunities.

These are a few of the illustrations of the uses and features of stock screener software.
 

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