Screening for Reversal Candles with Trading Range and Large-Order Flow

Summary

This post describes an equity screen combining a daily trading range above 1%, a reversal or engulfing-style pattern, and a condition involving price change multiplied by net volume from very large orders. It proposes restricting candidates to specified index constituents while excluding the growth-enterprise board, then considering valuation measures such as price-to-earnings and price-to-book ratios.

The post includes example indicator formulas and Python-like screening logic, but does not define a calibrated threshold for the flow-related condition or provide backtest results. It warns that the screen gives limited attention to fundamentals and may miss companies with sound fundamentals but weak flow readings. It suggests broadening the analysis with other technical and fundamental factors, and mentions machine learning as a possible way to assess indicators. These are suggestions rather than demonstrated improvements, and the supplied rules need careful implementation and empirical validation.

Key ideas

• The proposed screen combines a trading range above 1%, a reversal pattern, and a price-change measure tied to very large-order net flow.
• The author suggests applying index-membership restrictions and adding valuation checks.
• The post notes that a small set of market indicators can overlook fundamental differences among companies.
• No performance evidence is reported, and the flow threshold is left unspecified.

Tags

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