Home > Swing Trading Filters for Finding High Momentum Stocks

Swing Trading Filters for Finding High Momentum Stocks

The following stock filters or screens look for stocks that have seen recent momentum coupled with a long-term uptrend (or entering an uptrend). Not every stock on the lists is worth trading. We still need to manually go through the list and look for the right trades setups, but these stock screens are great at finding some big movers. 

How to find stocks to swing trade

In the Stock Market Swing Trading Course, I lay out some of my favorite patterns that I look for when swing trading, as well as ways to find those patterns. When we find a pattern, that is great, but finding those patterns in stocks that are also moving well can be challenging. Most people I interact with, who are struggling with their swing trading, simply aren’t patient enough in waiting for the really good setups. If this is a problem for you, possibly some alternate screens will help you zero in on some high momentum trades.

Two Parts to a Great Trade

There are two parts to a great trade. First, we need the proper setup. I trade setups that have shown a consistent tendency to produce winning trades 50%+ (and usually 60%+) of the time. But if you find a great setup in a stock that doesn’t have a lot of momentum, the returns for that trade in dollar terms are going to be minimal. The risk/reward may look good on the surface, but if that stock is only going to move 5% (with your risk being half, or less, than that), that is nowhere near as good as a stock where we can make 20% or more in the same amount of time. So finding momentum stocks is key.

Think of it this way. Assume you put on average about $10,000 into each swing trade you take. This may vary based on how far your stop loss is from your entry point, but for now, let’s assume you find two stocks that offer about the same risk. Your stop loss will be going about 5% below your entry point.

Trade 1 offers a risk of 5% with reasonable potential for a 15% gain. Based on how the stock has moved in the past, following prior entries that a stock price has typically moved about 15% before experiencing a significant pullback. As a swing trader, getting out before that pullback is prudent, as that money can then be put into other trades instead of watching your profits likely evaporate.

Trade 2 is NOT a slow mover. It is already up significantly over the last year or two. When it forms a valid trade setup the price has been running 30% to 40% before pulling back. It has formed a rare tight consolidation where we can enter with the same amount of risk as the stock above.

If choosing between these two trades, we should always take the second one. Some may think that trade one is less risky because the stock price moves less. But over many trades, we are compensated much better for the risk we are taking by Trade 2, or trades like it. In both cases, we are risking $500 (this should equate to less than 2% of your account). With Trade 1 we stand to make about $1500, where with Trade 2 we stand to make about $3000, likely over the same amount of time. In fact, since high momentum stocks tend to move very quickly, that bigger gain may come even quicker than the $1500 gain in the slow-moving stock.

I am not saying only trade stocks that will potentially move in your favor 30%+. What I am saying is that with finite amounts of capital, we need to find the best stocks to deploy it in. Don’t get suckered into a trading a slow-moving stock just because it is the first valid trade setup you see. If you look a bit more, you may find stocks that offer much greater risk/reward profiles because the price is moving with much more momentum.

Our goal is to find the best trades out there, which means (1) a good setup (2) in a stock that is moving very well. Sometimes the best trades we find during the week will be a slower moving stock, and that is ok, because it is the best that is out there and still provides a good risk/reward.

Finding High Momentum Stocks

Assuming you know some trade setups or patterns, the next part of the equation is finding a stock that will maximize the potential gain on that setup.

I primarily use Finviz and StockRover for finding swing trades. The screens below use StockRover criteria. For the most part, similar criteria can be inputted on Finviz.

Here is a swing trading filter I use to find stocks with strong long-term and short-term price movements. You could add in additional parameters to filter the list even more.

I call this one the Price Spike:

1-Year return > 40%  (This shows the stock has been strong for most of the year.)

10-Day Return > 8% (Stock has shown a lot of recent strength. I opted for 10 days because it will still catch stocks that had a runup but that have consolidated for a few days.)

Average Volume > 100,000 (Adjust as needed. A lower threshold means you may find some of those newer companies that aren’t as well known but are really exploding. A higher threshold filters out the low volume, which is good if you are taking large positions. For Canadian stocks I use a much lower threshold of 10,000 since the Canadian market is much smaller than the US market.)

Exchange = X (input the exchange you want, such as NASDAQ, NYSE, Arca, Toronto, Venture, OTC, etc.)

Price > $1 (I like to avoid the real little stocks. If it is a good stock, it will get above that $1 mark eventually. For Canadian stocks I usually keep this at $1, but for US stocks move it up to $5.)

Price Versus 50-Day Average (%) > 115% (This is saying that the current price must be above the 50-day moving average, which we would expect if the price has been strong recently. The 115% means the price is 15% of the average price, above the average price. Since stock screeners vary, you can simply put “above 50-day average”).

Optional: Price > 100-Day or 200-Day Moving Average (Add in this filter to further screen the results. You could also stipulate that the 50-day and 100-day are above the 200-day, for example. This focuses on stocks in longer-term uptrends, but eliminates stocks that are starting to spike up after a deeper correction.)

There will still be a lot of crap stocks with this filter. When running on US and Canadian exchanges I usually get about 100 results, and usually find at least several trades that are worth taking or are very close to forming a valid setup.

To find short trades, make the returns negative, and look for stocks below the moving averages. Everything else stays the same.

Here is another one, I call it Small Emerging:

As a technical trader, I am mostly concerned with what is going on with the chart. But the big institutions look at earnings and sales. They are crunching numbers and trying to figure out how much a company will be worth in the future if it keeps growing. They may buy small companies aggressively because they are growing and will one day be big companies with big price tags on their stock. Therefore, this screen looks for momentum and trends in smaller companies that have growing sales.

2-Year Return > 65% (Capture all stocks that been strong over the longer-term.)

Average Volume > 100,000 (Adjust as needed, but remember smaller emerging companies may not have big volume yet. For Canadain stocks, I may drop this down to 10,000.)

Exchange = X (Input the exchanges you want to screen.)

Market Capitalization < $400 million (Focusing on smaller guys here, which tend to have bigger moves in percentage terms than the huge companies that everyone knows about.)

Price Versus 200-Day Average > 90% (This basically means that the price is close to its 200-day moving average, or above it. I put 90% so that if a stock is a few cents below its 200-day it won’t be eliminated from the filter results.)

Sales Quarter-over-Quarter Change > 20% (Strong sales growth in the most recent quarter, compared to same quarter last year.)

Sales 1-Year Change > 20% (At least 20% growth in sales over the last year. Raise this number to hone in on stocks with even stronger growth.)

Optional: Sales 3-Year Change > 30% (This will show sales have been growing over the longer-term, but will also eliminate companies that are newer and haven’t been around for 3 years.)

Optional: Price Above 50-Day Average (If you want to find stocks that have some recent strength, add in this filter as well.)

Optional: Add in a filter that looks for earnings growth, quarter-over-quarter, or over the last year or two.

Finally, let’s look at one more. I call this one the Top Stocks, because it captures stocks in uptrends that are closing in on former highs.

1-Month Return > 10%

2-Year Return > 100%

Average Volume > 100,000 (Adjust as needed.)

Exchange = X

Price Versus 52-Week High > 80% < 105%  (If the 52-week high is 100%, then this filter is finding stocks that are at least at 80% of the high but not higher than 105%. For example, if a stock makes a 52-week high of $100 a month ago, the stock would show up on the list as long as the most recent price is between $80 and $105.)

Price > $1 (or $5)

Flip the parameters to look for short trades.

Stock Swing Trade Screens – Final Word

The unfortunate thing about screens is that they are exact. There may be a great trade setup out there, but maybe it only is only up 9.95% in the last month, so it doesn’t show up in the Top Stocks screener results. This is why I will use a few different screens, to look for different elements, every couple of days. I don’t go through each screener every day, rather I go through one or two on the weekend, then another after the close on Monday, then another after the close on Tuesday or Wednesday, etc..

As I go through them, I note any trades of interest on a piece of paper. After I have gone through the whole list of results, I go back to the ones I wrote down and do a more in-depth study. I look to see if the setup is really valid, what the risk/reward potential is, and also check if there are any earnings announcements or other things I should be aware of.

For every one stock that is setting up right now (and so I put out an order), I will find about 10 that are very close to setting up (no order…yet). All those ones that are “close” are written down, and I check back on them regularly. If they fail to form a valid setup, I cross them off the list. If it forms a valid setup, I place an order.

If this written list gets extensive, I don’t screen for a while, and instead just routinely check all the stocks on my written list. Once the list thins out (as trades are taken or crossed off), I go back to screening using the screens above or those covered in the Swing Trading Course.

Alter these screens to suit your strategy, or share screeners that you have found helpful for swing trading in the comments below.

By Cory Mitchell, CMT