Combining MACD, Moving Averages, and Profit Growth in a Stock Screen

Summary

This document presents an equity selection rule that combines a positive MACD signal, a 20-day moving average above the 120-day moving average, and year-over-year parent-company net profit growth above 20% and up to 100%. Its example implementation scans Chinese stocks, ranks qualifying names by profit growth, and describes weekly selection and portfolio adjustment. The method pairs a momentum or trend filter with an earnings-growth filter.

The article identifies possible weaknesses: moving averages can mislead for volatile stocks, and reported profit growth may miss companies with emerging potential. It recommends combining additional technical measures with growth and value indicators. Although code is supplied, the document gives no historical performance analysis or evidence that the selection rule works; the short description of results should therefore be treated as a screening recipe, not a tested investment conclusion.

Key ideas

• The screen requires MACD to be above zero and the 20-day average to exceed the 120-day average.
• It also requires parent-company net profit growth above 20% and at most 100% year over year.
• The example ranks qualifying stocks by profit growth and selects a small group for periodic portfolio adjustment.
• The author notes that moving averages may misclassify volatile stocks and earnings growth alone is incomplete.
• No backtest evidence is presented to establish the strategy's performance.

Tags

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