Screening for Reversal Candles Near the 10-Day Moving Average

Summary

This stock-selection note combines three technical conditions: prior-session amplitude above 1%, an opening price within 5% of the 10-day moving average, and a reversal candle pattern described as an engulfing move. It frames the amplitude filter as a way to find volatile shares, the moving-average condition as a price-location filter, and the candle pattern as a possible sign of a rebound. Indicator-formula and Python examples are included to illustrate implementation.

The article cautions that volatile stocks can have larger price swings, that a technical-only screen can omit other drivers, and that a reversal pattern may fail. It recommends considering financial and market information and reviewing results over time. The document provides no backtest or measured performance, and its formula and code descriptions may not implement the same candle logic consistently, so the pattern requires careful specification before use.

Key ideas

• The screen requires prior-session amplitude above 1%, an opening price within 5% of the 10-day moving average, and a reversal candle.
• The moving-average condition locates the opening price near a recent trend reference.
• The note treats the candle pattern as a possible rebound signal, not a guarantee.
• It warns of volatility risk and the limits of relying only on technical conditions.
• No measured strategy results are provided, and the example implementations need careful review for consistency.

Tags

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