Chinese Stock Screen for Reversal Candles and a 4–5% Intraday Drop

Summary

This document describes a Chinese equity screen combining three conditions: daily high-to-low amplitude above 1%, a reversal or engulfing-style candle signal, and a stated maximum daily decline between 4% and 5%. It presents the rules as a stock-selection method and provides example implementations for a charting platform and Python. The rationale is to find stocks showing a reversal pattern after a sharp decline, but the document does not provide backtest results or evidence that the combination predicts future returns.

The author cautions that the screen may select illiquid stocks and expose users to volatile or weak sectors. Suggested improvement is to add longer-horizon valuation measures, such as price-to-book or price-to-earnings ratios. The supplied code appears internally inconsistent: its Python maximum-drop calculation uses the high-low range divided by close, and the stated negative thresholds do not align with that positive quantity. The candle condition also needs careful validation before use.

Key ideas

• The screen combines daily amplitude, a reversal candle condition, and a maximum-decline range.
• The document provides example implementations but no performance testing or empirical support.
• The author flags liquidity and volatility as risks of selecting candidates this way.
• Longer-term valuation measures are suggested as additional filters.
• The provided Python calculation and negative decline thresholds appear inconsistent and should be checked.

Tags

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