• : February 14, 2021
  • : Prashant Shah


DIP

We discussed about Disparity index method of identifying stocks in pullback trend in the last newsletter. I also explained how to create scanners using it.

How about adding a condition for confirmation to the pullback pattern. For example, looking for column of
‘X’ after pullback.

Below is a condition for the strategy.
 

Bullish Disparity Index Pullback X strategy:

  • Disparity index above -1% at 1
  • Disparity index below 1% at 1
  • Not Double top buy at 0
  • Expression: 1 and 2 and 3

Not double-top buy pattern on current column ensures price has turned to column of X.

Let’s explore the concept further. Using Disparity index indicator, we are trying to identify stocks in the
correction.



It would be a sensible idea to buy stocks on pullback when their higher timeframe trend is bullish and strong.



Let’s call it DIP (Disparity Index Pullback) pattern.

A simple criterion for strong and bullish uptrend could be: Price above moving average on higher box- values.

Objective rules for DIP pattern could be:

1 – Bullish Disparity Index Pullback X Strategy on 0.25% box-value 2 – Price above moving average on 1% box-value
3 – Price above moving average on 2% box-value 4 – Price above moving average on 3% box-value

We can define above conditions in the scanner. It will show us the list of stocks in DIP pattern.

To run above conditions on one scanner in TradePoint, Go to -> Matrix ->Milti-timeframe Systems -> P&F Multi-timeframe System Matrix.



Select conditions for different box-values as per strategy discussed above.



Scoring method: When a scrip qualifies the condition defined on a box-value, score is 1. Else it is 0. When total score is 4, the scrip is qualified for conditions defined on multiple-box values.


In above scanner, stocks having score 4 are Bullish DIP pattern stocks.

The pattern is applicable on all charting types. We discussed about it on Renko chart during last week. Can you try creating similar scanner on Renko charts as well? Vice versa is applicable for Bearish DIP pattern.

The rules defined for the conditions are carefully designed to keep it very simple. One who knows even basics of P&F and Moving average will be able to understand the rules and logic behind the system. The scanner discussed above can help you easily find strong trending stocks trading in a pullback area.