Screening Small Profitable Stocks with RSI and Three Down Days
Summary
This stock screen combines a 14-period RSI below 65 with three consecutive sessions in which the close is below the open. It also limits candidates to companies with market capitalization no greater than 100 billion and positive earnings, combining a short-term price signal with size and profitability filters. The document includes example implementations and describes the approach as a way to identify smaller profitable companies after recent weakness.
No performance results or backtest evidence are provided. The author notes that RSI can lag or misclassify conditions, that the size and earnings filters may exclude other attractive stocks, and that market sentiment is not captured. Suggested extensions include adding sentiment, growth, valuation, and dividend measures, assigning sensible weights, and testing across multiple periods while applying risk controls. The criteria are presented as a screening recipe, not as evidence of a validated or profitable trading strategy.
Key ideas
- The screen requires a 14-period RSI below 65 and three consecutive down sessions measured by close below open.
- It further filters for market capitalization at or below 100 billion and positive earnings.
- The method combines short-term technical weakness with company size and profitability criteria.
- The document provides no performance evidence and identifies indicator lag and omitted market sentiment as limitations.
- It recommends broader filters, multi-period backtesting, and risk controls for further evaluation.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.