Combining Buying Pressure and Moving-Average Trend Filters for Stock Selection

Summary

This note presents a Chinese stock-selection screen using three conditions: today’s increase in holdings above 5%, the ratio of external to internal trading volume above 1.3, and the 20-day moving average above the 120-day moving average. The first two conditions are framed as signs of buying interest, while the moving-average comparison seeks stocks with stronger short-term than long-term price trends.

The author cautions that the screen may emphasize short-term direction while overlooking a declining longer-term market, and that sentiment can shift abruptly. Suggested additions include valuation measures and other technical indicators. The note also gives a code example, but its implementation averages indicator values across stocks before screening and refers to an undefined long-term average; this does not clearly match the stated per-stock selection rule. No backtest, performance evidence, or operational validation is provided, so the screen’s predictive value is not established.

Key ideas

• The proposed screen requires holdings growth above 5%, an external-to-internal volume ratio above 1.3, and the 20-day average above the 120-day average.
• The buying-activity measures are intended to indicate demand, while the moving averages represent relative short- and longer-term trends.
• A short-term uptrend can coexist with a weakening longer-term trend, and market sentiment can change quickly.
• The example implementation does not clearly apply the described criteria to each stock and contains an undefined moving-average reference.
• The document offers no performance test to establish whether the selection rules are effective.

Tags

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