Published on: December 11, 2024
For many traders, finding the perfect stocks to buy or sell can often feel like looking for a needle in a haystack. Should you chase after those stocks that are rising rapidly? Or should you target underperformers, hoping that they will bounce back? These questions have perplexed traders for decades.
Meet Raj, a stock market trader who has been trading for over 10 years. He has always been intrigued by the debate between fundamental and technical analysis. While he appreciated the value of fundamentals—looking at a company’s earnings, balance sheet, and growth potential—he was particularly drawn to technical analysis after attending one of the DECMAs with his friend. This allowed him to spot trends and make faster decisions.
Raj’s strategy revolved around identifying stocks that were either outperforming or underperforming relative to a benchmark, typically the Nifty50 index. His experience taught him that stocks performing well relative to the Nifty50 had momentum, and those lagging could present buying opportunities if their momentum reversed.
However, tracking these stocks across multiple timeframes was exhausting. Comparing 50 different stocks to the Nifty50 index over multiple timeframes—daily, weekly, monthly, and quarterly—was a task that could easily overwhelm any trader.
The Dilemma: Tracking Multiple Timeframes
Raj had spent countless hours watching charts, trying to determine which stocks were outperforming the Nifty50 and which were underperforming. But even with his experience, the sheer volume of data was difficult to process. How could he identify the strongest performers without manually analysing hundreds of charts?
Raj was exhausted when faced with a mountain of charts—overwhelmed and unsure of where to begin. That is until he discovered the Definedge Multi-Timeframe RS Pattern Scanner—a game-changing tool that could handle this very challenge.
Multi-timeframe RS Patterns
The scanner was designed to simplify stock performance monitoring. It uses ratio charts to automatically compare each stock’s performance against the Nifty50 index across multiple timeframes: quarterly, monthly, weekly, and daily.
Here are the steps to use this scanner:
- Login in RZone
- Select Multi-Timeframe RS Patterns
3. Select a Group and Compare script in Script2 (we selected Nifty50 for the result presentation)
Here is how the scanner result is presented:
The scanner provided a visual comparison, highlighting which stocks were outperforming and which were underperforming in a given timeframe.
The process was simple yet powerful:
- Quarterly Ratio Chart: Comparing the stock’s price relative to the Nifty50 over the past three months.
- Monthly Ratio Chart: Measuring the stock’s performance against the Nifty50 over the past month.
- Weekly Ratio Chart: Tracking weekly performance against the Nifty50.
- Daily Ratio Chart: Monitoring daily price movements compared to the Nifty50.
The scanner then scored each stock’s performance on these timeframes. A score of 1 meant the stock was outperforming the Nifty50, while a score of 0 indicated underperformance. Stocks that scored a perfect 4—outperforming across all four timeframes—were deemed the strongest, while those scoring 0 were viewed as bearish.
This tool allowed Raj to quickly filter through a large universe of stocks and identify the strongest and weakest performers. No more hours of manually tracking dozens of charts—everything was conveniently laid out in one easy-to-read interface.
The Outperformers
Raj wasted no time using the scanner. Within minutes, he identified three stocks from the Nifty50 that were outperforming the index across all four timeframes. These stocks were the strongest performers in the market, and Raj knew they could potentially offer solid trading opportunities.
Here are a couple of examples of a chart setup of these outperforming stocks:
HCLTECH/NIFTY50
L&T/NIFTY50
A New Level of Efficiency
For Raj, the scanner wasn’t just a tool—it revolutionised his trading strategy. It saved him hours of manual work and helped him focus only on the stocks with the best potential for profits. His trading was now more efficient, accurate, and timely.
Raj quickly adapted his strategy. He would set aside a few minutes each morning to check the Multi-Timeframe RS Pattern Scanner, identify the strongest stocks, and then move forward with his trades. No more guesswork, no more wasted time. This scanner by Definedge gave him the ability to make decisions with precision, ensuring that he was always one step ahead in the market..
Have you tried this scanner?
