Methodology

This is the complete rule Signal desk runs, written out rather than described. Every stock is tested the same way at the same hour, and the result is published whether it worked or not. Nothing here is discretionary and nothing is chosen after the fact.

Last updated By Izaias Cavalcanti

This page is the whole rule. It is written out rather than summarised, because a screen that describes itself vaguely can be adjusted after the fact and nobody would know. Anything below that changes will appear dated in the changelog.

What gets scanned

  • United States: every stock listed on the NYSE, NASDAQ and AMEX.
  • Brazil: the Ibovespa constituents on B3.

Two screens run over that universe independently, one on monthly bars and one on annual bars, and they maintain separate watchlists.

How StochRSI is computed

Exactly as the Pine Script reference implementation does, so that a reading here matches a reading on a charting platform rather than approximating it:

  • RSI length 14, using Wilder's RMA rather than a simple moving average.
  • Stochastic lookback 14.
  • K smoothed over 3 periods, D smoothed over 3 periods.

The annual screen computes its own bars by resampling monthly price data into annual bars, and requires at least 17 annual bars of history before it will produce a reading.

The monthly screen

Runs on the last trading day of the month only. The job is scheduled across the final days of each month and does nothing on any day that is not the last one. In order:

  1. Monthly StochRSI K at 100 and D at 100.
  2. Listed on NYSE, NASDAQ, AMEX or B3.
  3. Roughly 20 months of listing history or more.
  4. Not an acquisition shell.
  5. The monthly bar closes green, above its own open.
  6. Relative volume over the last 10 days above 1.
  7. Daily SMA(8) above SMA(20). Fails closed.
  8. Both business filters below pass on freshly fetched data. Fails closed.

The annual screen

Runs on the first of each month. In order:

  1. Annual StochRSI K at 99 or above.
  2. At least 17 annual bars of history.
  3. Daily SMA(8) above SMA(20). Fails closed.
  4. Both business filters pass on freshly fetched data. Fails closed.

Filter A: growth in the forecast

Analysts must expect earnings to grow at least 10 percent a year. The figure used is the average of the current year and next year consensus earnings growth estimates. A stock with no analyst coverage has no figure and therefore does not pass.

Filter B: institutional accumulation

Of BlackRock, Vanguard and State Street, at least two must have increased their position and the third must not have reduced it, according to the most recent quarterly filings. Any of the three missing from the data is a failure. Because this depends on a United States disclosure regime, a B3 listed stock generally cannot produce the data and therefore cannot pass. This is covered in more detail in what 13F filings say.

How a signal fires

Every weekday after the United States close, the daily StochRSI K of every active stock on both watchlists is read.

  1. Armed

    Daily K falls to 20 or below. The stock is flagged as armed. No signal.

  2. Signal

    An armed stock's daily K rises back above 20. A signal is recorded and the armed flag is cleared.

  3. Re-checked before recording

    Both business filters are tested again at this moment. If either cannot be verified, the signal is suppressed rather than recorded.

Signals are numbered per stock. The first is recorded as opening a position and each subsequent one as increasing it.

When everything runs

JobWhenTime (UTC)
Monthly scanLast day of month21:45
Annual scan1st of month06:20
Signal scanWeekdays22:10
Price refreshWeekdays21:20
Fundamentals refresh2nd of month06:20

These are the scheduled times. The jobs run on shared infrastructure whose queue can add delay, so a run may execute later than its scheduled hour. The signal check itself happens exactly once per weekday.

What the published percentages mean

They are plain price changes. For a signal, the change from the price when it fired to the current price. For the portfolio chart, an equally weighted basket rebased over the selected window.

There are no positions, no sizing, no costs, no slippage and no taxes behind any of it. It is not a backtest and it is not a real world return. It is a record of what the rule pointed at and what those prices did afterwards.

Where the data comes from

  • Screening and daily readings: TradingView's public screener.
  • Price history and estimates: Yahoo Finance.
  • Institutional ownership: quarterly 13F filings, via Yahoo Finance's holder data.
  • Universe: NASDAQ Trader symbol files, plus the Ibovespa constituent list.

Common questions

What is StochRSI?

StochRSI measures how stretched a stock's momentum is, on a scale of 0 to 100. It gets there by applying the stochastic oscillator to RSI values instead of to price, so it reads the momentum of the momentum. A reading near 100 means RSI is sitting at the top of its own recent range, and a reading near 0 means the bottom. Signal desk computes it exactly as the Pine Script reference does: Wilder's RMA, RSI 14, stochastic 14, and K and D smoothed over 3.

What does a StochRSI reading of 100 mean?

It means momentum is as stretched as it has been in the last 14 periods, because RSI is sitting at the very top of its own range. On a monthly or annual bar that is rare, and it tends to last, which is why Signal desk treats it as a reason to start watching a stock rather than a reason to buy it straight away.

How do you trade a StochRSI pullback?

The pattern Signal desk tracks is a pullback re-entry in three steps. First, a stock qualifies when monthly or annual StochRSI K and D both reach 100 and it joins the watchlist. Second, it becomes armed when daily K falls to 20 or below. Third, a signal fires when daily K recovers back above 20, which means the dip is over and the long term trend is still intact.

Which markets does Signal desk cover?

US stocks on the NYSE, NASDAQ and AMEX, plus Brazilian stocks on B3. The monthly scan runs on the last day of each month, the annual scan on the first of the month, and the daily signal scan every weekday at 22:10 UTC, after the US close.

Does a stock need more than a StochRSI reading to produce a signal?

Yes. Two filters on the business itself must also pass before a stock joins a watchlist or a signal is recorded: analysts have to expect earnings to grow at least 10 percent a year, and BlackRock, Vanguard and State Street have to be adding to their positions rather than cutting them. Both are checked against data pulled fresh at that moment, and if either one cannot be checked the stock is not admitted. Where there is doubt, the answer is no.

Is Signal desk investment advice?

No. It is a public record of a mechanical screen. The percentages shown are plain price changes with no positions, sizing or costs behind them, so they are not a real world return.

Keep reading

How do you trade a StochRSI pullback?A three step rule for buying a strong stock after a pullback rather than at the top. Qualify on Why does missing data count as a failure?Most screens treat missing data as neutral and let a stock through. Signal desk treats it as a About Signal deskSignal desk is built and run by Izaias Cavalcanti, a product designer and design engineer. It

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Signal desk is a public record of a mechanical screen. It is not investment advice and it is not written by a licensed financial adviser. The percentages shown are plain price changes with no positions, sizing or costs behind them, so they are not a real world return.