Scanning for Breakout Setups Using Worden TC2000 PCF
Scanning for Breakout Setups using Worden TC2000 PCF is a guide for traders using TC2000 who are looking to find stocks that are breaking out and increasing in momentum.
We’ll walk through a few different scan ideas, explain the thought process, and share all of the code that goes into each condition. The basis of our scans assume daily charts, but the concepts could be adapted for shorter time-frame trading.
I’ve recorded a video below that covers the exact keystrokes and setup process within TC2000 so you can easily duplicate everything in your environment. I also go more in-depth explaining the thought process behind all of the scans that follow.
If you aren’t a TC2000 user yet, you can use this referral link to get their latest promotional offer.
We’ll start out sharing a few different breakout and momentum conditions and then follow up with some additional criteria that you’ll want to pair them with in order to better qualify the list of stocks returned.
At the end of the article, we’ll show you how to bundle everything up into complete, well-rounded scans.
Breakout condition #1 – new 52-week highs
Let’s start off with criteria that you’re probably very familiar with: stocks hitting new 52-week highs. This is a classic breakout/momentum scan that returns stocks trading at their highest levels looking back over the past 12 months.
The PCF equation for new 52-week highs is as follows:
(C >= MAXC252.1)
Breakout condition #2 – reclaiming a significant moving average
This particular type of scan isn’t one that I personally use myself but I know enough traders use this as a signal so I figured it would be helpful to include it.
The thought process behind reclaiming a moving average is that some moving averages get more attention than others (50-day and 200-day in particular) so when stocks reclaim them, traders become more confident in the underlying stock, which paves the way for continued momentum to the upside.
Example of a stock CPLA reclaiming its 50-day moving average (yellow line).
The key to writing this scan is that you need to make sure you explicitly state that this is a fresh day one remount of the moving average otherwise you will simply get stocks that have been trading above these averages for a long time.
The PCF formula for reclaiming the 50-day moving average:
(C > AVGC50) AND (C1 < AVGC50.1)
Pro tip: You could be more rigorous and check to make sure the last several days or even several weeks were not above the moving average that way you are more confident you are getting a brand new and long-awaited remount of the moving average.
Breakout condition #3 – breakout above last week’s highs
Here’s a more modest breakout condition but one that can offer some nice short-term momentum under the right market conditions.
The thought process behind this scan is that by looking at weekly time-framed bars, we can use the prior week’s highs as a breakout/momentum signal that buyers are in control and pushing prices above the entire range traded last week.
Weekly bar OHLC tend to carry a bit more significance behind their levels due to the attention they get from intermediate and long-term traders and investors.
You’ll want to make sure you set this condition’s time-frame to weekly which we’ll show how to do in the video.
The PCF formula for a break above the last bar highs:
(C > H1)
Additional scan criteria
We just outlined three different types of breakout conditions, but now we want to take things a step further and improve the quality of stocks returned. Instead of trading just any old breakout, let’s make sure we have a few other technical conditions lined up in our favor.
I call this stacking the odds in a trade. Below are three more criteria that I think could be helpful to include in your scans.
Trade stocks that are in uptrends
Who wants to take a breakout signal in a stock that has been getting crushed and is trading in a downtrend?
Here’s a classic filter that should be applied to just about all of your bullish scans to increase their success rates.
There are lots of ways to define an uptrend, I’m simply going to take two moving averages and make sure they are in bullish alignment and price is trading above both.
For example, the 50-day moving average is above a 200-day moving average and price is above both. For shorter term swing traders, you may consider using a 10-day and 50-day moving average, it really depends on your time-frame and trade outlook.
Example of uptrend, price is above the 50-day (blue) which is above the 200-day (yellow).
The PCF formula for stocks in a long-term uptrend:
(C > AVGC50) AND (AVGC50 > AVGC200)
The PCF formula for stocks in a short-term uptrend:
(C > AVGC10) AND (AVGC10 > AVGC50)
Trade stocks with bullish RSI
Once again, this isn’t an indicator I personally use in my trading, but I do know many traders that use RSI in their strategies/setups. You could also substitute in MACD or some other momentum technical study and achieve a similar effect.
The theory here is that strong stocks should not get deeply oversold from a momentum standpoint when they do experience a pullback. The ideal scenario is that the stock will be above the RSI midpoint line (signaling strength) at the time of entry.
The PCF formula for stocks holding above RSI midpoint:
(RSI14 > 50)
Pro tip: You could also look back over the past few days if you want to be a bit more thorough in making sure the stock has been holding bullish RSI levels.
Trade stocks with above average volume
Nothing gives me more confidence in a trade setup than seeing high volume accompany what I consider to be an A+ price action setup – especially when we are looking at about breakouts and momentum.
Example of a volume surge over the 50-day average as price breaks to new highs.
There are lots of ways to define high volume. For me, I like to keep things simple and use a 20-day or 50-day moving average of volume and simply require that the entry day be above that average. Some traders prefer 200% or 300%, there’s no right or wrong, it’s entirely up to you.
The PCF formula for the volume today to be above the 20-day average.
(V > AVGV20.1)
Base scan criteria
Last but not least, let’s make sure we include what I call basic scan criteria. This covers the personal preferences of traders with filters on things like only trading stocks over $5 and only trading stocks with sufficient liquidity.
Everyone will have a personal list here, but I’m going to include some of the most common criteria that I see:
PCF formula for the average 50-day volume to be greater than 300,000 shares:
(AVGV50.1 > 300000)
PCF formula for the share price to be over $10:
(C > 10)
You could also add in a condition about the minimum market capitalization to your base criteria. I’m not aware of PCF code for this, instead, you can select capitalization from the built-in dropdown list while building out your easy scan.
Putting it all together
We’ve outlined all the building blocks to form a complete and well-rounded scan. Here’s an example of what the final line up looks like in Worden TC2000 Edit Conditions window using our 52-week high breakout condition:
Now all you need to do is choose your stock universe (I tend to always use US Common Stocks) and you’ll be on your way to get a list of quality stocks breaking out to fresh 52-week highs.
It’s important to remember, the more conditions you impose, the more strict the scan is, and thus the fewer results you should expect.
For example, you may run this scan and get back zero results but maybe if you drop out the above average volume condition you may start to see a few. Bullish scans like this will also vary greatly in the number of stocks returned depending on the current market environment.
Substitute in either of the other two breakout conditions we outlined above in that #1 spot and there you have three different breakout/momentum scans.
Scanning for breakout setups using Worden TC2000 PCF
I hope you found this guide helpful. As a reminder, I encourage you to modify, adjust, and throw away any of these conditions you see fit based on your specific strategy and goals.
If you enjoyed this article and want more on scanning for stocks with TC2000, check out our post, Scanning for Swing Trade Setups in TC2000.
If you have an idea for a scan but need it developed for you, check out the custom PCF coding service we offer.
Last but certainly not least, we have a store filled with pre-built TC2000 scans and indicators available for download (free and paid) which you’ll definitely want to check out.
Thank you for reading and good luck out there!
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