Stock Screening with Moving Average Alignment and Positive Returns

Summary

This document presents a technical equity screen requiring at least five moving averages to converge, a positive return, and the 20-day moving average to exceed the 120-day average. Its rationale is that clustered averages may indicate relatively stable prices, positive returns select rising stocks, and the faster average above the slower one suggests stronger short-term than long-term direction. It also includes sample code intended to illustrate moving-average calculations and filtering.

The author identifies market volatility, the limits of technical analysis, and trading costs as risks. Suggested refinements include testing alternative average periods and incorporating company financials or industry trends. The sample code does not clearly implement the stated five-average convergence condition, and the document gives no backtest or performance evidence, so the screen should not be treated as a validated strategy.

Key ideas

• The screen looks for at least five converging moving averages and a positive return.
• It requires the 20-day moving average to be above the 120-day average.
• The stated rationale links clustered averages to price stability and the faster average to short-term strength.
• Potential risks include market movements, technical-analysis limitations, and transaction costs.
• The code example does not clearly verify five-average convergence, and no performance results are reported.

Tags

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