Combining Moving Average Alignment and Bollinger Band Position in a Stock Screen

Summary

The strategy screens for stocks with at least five overlapping moving averages, a closing price between the Bollinger middle and upper bands, and a 20-day moving average above the 120-day average. The moving-average relationship is intended to capture a more favorable short-term trend relative to the longer-term trend. The band condition places price above the middle band but below the upper band, which the document associates with a relatively elevated price and possible pullback risk.

The article recommends further analysis of candidates and suggests adding indicators such as MACD or RSI. It includes a Python sketch, but it does not provide a tested universe-wide implementation, backtest, or performance evidence; the sample’s calculations do not clearly correspond to all the stated screening conditions. The author also notes that indicator signals can be inaccurate and that meeting the filters does not prevent a price decline. The rules are best viewed as a preliminary screen requiring validation and additional review.

Key ideas

• The screen combines at least five overlapping moving averages with a Bollinger Band position and a 20-day versus 120-day average comparison.
• The close must fall between the Bollinger middle and upper bands.
• The short moving average above the long average is used as a trend filter.
• The document flags pullback risk when price is in the upper half of the bands.
• No backtest is supplied, and the sample code does not clearly implement every stated condition.

Tags

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