A Chinese Equity Screen Using Moving Average Convergence and Valuation Filters

Summary

This post proposes a Chinese equity screening idea that combines several moving averages converging, an opening price near the 10-day average, and a positive but bounded 10-day return. It interprets converging averages as a sign of stable trends and recent gains as evidence of short-term strength. The post then revises the screen, suggesting at least six overlapping averages, a wider return band, and valuation filters requiring low price-to-earnings and price-to-book ratios.

The source offers a rationale and illustrative code fragments, but no backtest, performance statistics, universe definition, or precise operational definition of when averages count as overlapping. It also acknowledges that market volatility may invalidate the trend signal and recommends combining technical and fundamental factors. The code does not clearly implement the full final screening logic, so the thresholds should be treated as a proposal requiring careful specification and out-of-sample validation rather than as an established strategy.

Key ideas

• The proposed screen looks for multiple moving averages clustered together and an opening price near the 10-day average.
• It combines that technical setup with a positive recent return, then suggests adding valuation limits based on earnings and book value.
• The post revises its initial thresholds, so the final screening rules differ from the opening description.
• No backtest or evidence of profitability is supplied, and the implementation examples do not fully specify the final screen.
• The author cautions that market shocks can disrupt price trends and suggests using additional investment criteria.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.