Chinese Stock Screening with MACD, Moving Averages, and Order Flow

Summary

The document presents a Chinese equity screening rule that requires MACD to be above zero, the reported external-to-internal trading volume ratio to exceed 1.3, and the 20-day moving average to be above the 120-day average. Stocks passing all three filters are ranked by their percentage gain. The intended interpretation is to combine positive momentum, a favorable short-to-long trend comparison, and a measure of buying versus selling activity.

It flags the screen’s reliance on a small set of indicators, its binary conditions, and the risk that moving averages can misclassify a stock’s trend. It suggests adding technical and fundamental measures, testing stability on separate data, and considering industry variation. However, the proposed final rule repeats the original screen, and the sample code contains implementation ambiguities, including how the order-flow ratio and return ranking are calculated. No backtest results or transaction-cost analysis are supplied, so the rule’s predictive value is unestablished.

Key ideas

• The screen requires positive MACD, an external-to-internal volume ratio above 1.3, and the 20-day average above the 120-day average.
• Passing stocks are ranked by percentage gain.
• The indicators are intended to capture momentum, trend, and trading activity.
• Simple threshold rules may be unstable across industries and market conditions.
• The article provides no performance evidence, and its example calculations need careful validation.

Tags

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