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Introducing the Century Club scan
Topics: charts, news and views, trade ideasA year or two ago, buying deep value stocks was a pretty easy way to make money with microcaps. Like most microcap traders, I built screens to identify these stocks. But they no longer work.
Deep value screens today identify stocks with one foot in the grave, or at least with a set of shareholders ready to unload into any pop. So I ditched the old screens, and set about developing new new tools to identify microcaps that may be in the early stages of a significant move. This approach requires use of a technical analysis screener as a first pass, followed by fundamental analysis.
I’ve toyed around with a number of technical screeners, but with the right tweaks none are better for microcaps than MarketClub’s "Smart Scan." Don’t use the out of the box settings. The default screen uses an indicator called directional movement index (DMI) that is not tuned for smaller stocks.
I shift the scan setting to "Chart +100." This will identify stocks with a perfect +100 score on MarketClub’s objective technical analysis scoring. To focus in on microcaps, I limit the universe to stocks under $10.
The results of this scan — which I call the Century Club — are almost always worth further investigation. Keep in mind that the scan is only the first step. I follow it up with a look at the fundamentals and news flow.
Each scan pulls up around 50-100 stocks. Here are a few from a scan I ran at the end of business Tuesday, June 23:
Beacon Enterprise Solutions (BEAC)
Commercial Vehicle Group (CVGI)
Evolving Systems (EVOL)
Evotec AG (EVTC)
La-Z-Boy (LZB)
DISCLOSURE: No positions in stocks mentioned. Besides being a heavy user of MarketClub’s smart scan, I’m also an affiliate.
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