Use this screen or filter to find stocks that are in an uptrend but that have recently pulled back. As with all screeners, the stocks produced won’t all be worth trading. Run the scan once or twice per week to see if there are opportunities you like. This screen finds stocks that are in a loosely defined uptrend, then the relative strength index (RSI) is used to assess when the stock is pulling back or dropping within that uptrend. Many traders like to buy during a pullback within an uptrend…especially when the price starts to turn higher again.
Uptrend and RSI Pullback Stock Screen
An uptrend is defined as rising swing highs and rising swing lows in price. When viewing a price chart, I apply those criteria. When using a stock screener I use simpler parameters. For example, if a stock is above it’s 200-day moving average (MA) then it could be in an uptrend. MAs are an easy way to scan for trends. They are not perfect, because the price could be above its 200-day MA and have entered a downtrend, or a stock could be below its 200-day MA and be in an uptrend, but overall MAs are a fairly good way to find stocks that are likely in uptrends.
For this screen, we are going to look for stocks that are above their 200-day MA.
The RSI measures where the price is within the indicator’s lookback period. The lookback period for the RSI is adjustable, but is 14 periods (days, in our case) by default. A low reading, such as 20, means the price is near the lows of the last 14 days. A high reading, such as 87, means the price is near the upper end of the last 14 periods.
During an uptrend, the RSI will typically stay above 30 and frequently reach 70 or above. This is useful for determining when the stock is pulling back within its uptrend. If the RSI is reading 50 or 40, the price is trading near the mid-point or lower portion of its recent price range. But based on the 200-day MA, over the longer-term, it is still in a possible uptrend.
For this screen, we are going to look for stocks that are below 50 on the RSI, yet still above 30! Being above 30 is important because an uptrending stock typically (there are exceptions) doesn’t dip below 30 on the RSI. If it does, it more often signals that the stock has shifted into a downtrend as opposed to a buying opportunity.
Add Additional Criteria
For any stock scan you run, add in additional parameters such as volume, price, and exchanges (or country).
If your screener scans stocks in multiple countries, choose the country you want, such as “only U.S. stocks” for example.
Set the minimum average volume you want in the stocks. For example, 500,000 shares a day.
Set the minimum or maximum price of the stocks you want the screener to find. For example, close above $5. That means the last closing price was greater than $5.
Alter these parameters to suit your preferences.
Also feel free to add in additional criteria, such as additional MAs or performance metrics to narrow the list even further. When doing so, note how the stocks on the list change. You don’t want to eliminate the good trade candidates (discussed shortly) by adding in too many criteria.
Uptrend with RSI Pullback Code
The above criteria can be inputted in a stock screener like Finviz, or can be coded into StockFetcher. Here is the Stockfetcher code, based on the example parameters above:
close above MA(200)
and average volume(50) above 500000
and RSI(14) below 50
and RSI (14) above 30
and close above 5
draw RSI(14) line at 40
add column RSI(14)
add column volume (50)
Make adjustments based on your parameters. Also, you may wish to draw the RSI line at 50 or 30 instead of 40.
Filtering the Results
This screener can produce a lot of results, especially if the stock market indexes, such as the S&P 500, are in uptrends as well.
The good thing is that most of the stocks can be eliminated with a glance.
- If on a one or two year chart the price is moving mostly sideways, eliminate it as a trend trading opportunity.
- If the price action is very choppy, eliminate.
- If the price is constantly crossing back and forth across the 200-day moving average, eliminate.
For example, this stock met the criteria but is one I would instantly pass on. It is moving mostly sideways over the last year and a half and sea-saws across the MA. That doesn’t mean a person couldn’t make money trading this stock, but it is not something I personally would be interested in trading with this MA and RSI method.
- On the other hand, focus on stocks where the price and 200-day are separated by some space, and overall the stock has made steady progress higher over the last year or two.
For example, this stock meets all the screener critiera, and also meets these additional guidelines. A stock like this will occur frequently on the screener results. Over the last 18 months, there were a handful of times the RSI dropped below 50, signaling a pullback. The price stayed well above the 200-day MA, and when the price and RSI turned back up the uptrend continued.
Note that on the chart I have the RSI drawn at 40, not 50, so this stock would have come up on the screen nearly every time the stock pulled back within this long-term uptrend.
Don’t trade all the stocks on the list. The screener is just meant to provide a smaller list of trade candidates. Quickly eliminate any stocks based on the guidelines above, and write down the ones that are of interest. Examine the ones of interest in greater detail, then assess where the entry would be, where the stop loss would be, and whether the potential reward-to-risk justifies a trade.