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Pullbacks scan

Pullback in an Uptrend Screener

This scan finds stocks that are above their 200-day moving average (a long-term uptrend) but have an RSI (14) below 40 (short-term weakness).

Run this scan in the live demoFree, no sign-up. The demo uses made-up sample data.

The exact rule

Type this in Chalni: close above 200 day sma and rsi below 40

  1. Close > SMA(200)
  2. RSI(14) < 40

Find US stocks where the closing price is above the 200-day simple moving average; and RSI (14) is below 40.

Formula view
close > sma(close, 200)
AND rsi(14) < 40
Example chart: Pullback in an uptrendDaily candles of a made-up sample stock with 200-day SMA; Lower panel: RSI (14), dotted lines at 30, 40 and 70. The shaded day is the day the scan fired.
  • 200-day SMA
  • Lower panel: RSI (14), dotted lines at 30, 40 and 70
  • Shaded day: the scan fired
Example from Chalni's made-up sample market, not a real stock. It shows the most recent time this scan fired in the sample US market, picked whether or not the trade worked.

What it means

Buying strong stocks on a dip is one of the most popular swing trading ideas. The 200-day average says the long-term trend is up. RSI below 40 says the stock has pulled back recently. Together they look for a discount in a stock that is still healthy.

Larry Connors made short-term RSI pullback rules with a 200-day trend filter well known. The idea is the same: in an uptrend, short dips have tended to bounce more often than not.

How traders use it

  • Wait for a sign of the turn, such as an up day or a bullish candle, before buying.
  • Use a stop below the recent low. If the 200-day average breaks, the uptrend idea is wrong.
  • Try a stricter RSI number (35 or 30) in the demo for deeper dips.

Watch out for

  • A dip can turn into a trend change. Stocks that fall hard on bad news are not ordinary pullbacks.
  • In a bear market, most stocks fall below the 200-day average and the scan finds little.

Test it before you trust it

Every scan in Chalni sits an exam. First it runs on older data, the practice: each time it picks a stock, the stock is held for 10 trading days and 0.2% is paid in costs. Then it runs on newer data it has never seen, the exam. A scan that only works in practice has just memorised the past.

See the practice and exam results for this scan in the demo (on sample data; real data comes at launch).

Questions

What is a pullback in stocks?

A short drop inside a bigger uptrend. Traders try to buy pullbacks because the price is lower while the main trend is still up.

Why RSI below 40 and not 30?

In an uptrend, RSI rarely falls as low as 30. A level like 40 catches normal dips. You can change the number.

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