Mastering the "Strong Stocks" Scanning Strategy for Swing Trading

Overview

This course provides a comprehensive guide to identifying "Strong Stocks"—equities exhibiting high relative strength and bullish momentum—using a systematic scanning approach. By leveraging the technical capabilities of TradingView, traders can filter through thousands of tickers to find high-probability winners. This process is essential for any finance professional or retail trader who wants to move away from guesswork and toward a data-driven selection process.

Background & Context

In the vast landscape of the stock market, the primary challenge for a swing trader is "selection bias" and "information overload." With thousands of available tickers, manually searching for stocks that are trending upward is inefficient and prone to emotional error. The "Strong Stocks Scan" is a methodology designed to solve this problem by automating the discovery process.

This approach fits into the broader landscape of Momentum Trading and Relative Strength Analysis. The goal is to identify stocks that are outperforming the general market (such as the S&P 500) during both uptrends and corrections. By focusing on stocks that "hold" their value when the market dips and "fly" when the market recovers, traders can position themselves in the strongest assets, thereby increasing their win rate and potential returns.

Core Concepts

Stock Scanning (The Filtering Process)

Stock scanning is the process of applying a set of predefined technical or fundamental criteria to a universe of stocks to narrow down a massive list to a handful of actionable candidates. Instead of looking at random tickers, a scan acts as a funnel, filtering out "noise" (stocks in downtrends or sideways movements) and highlighting "signals" (stocks showing explosive growth). For example, a scan might filter for stocks with a price above their 200-day moving average and a positive rate of change over the last 3 months.

Relative Strength (RS)

Relative Strength is the measure of a stock's performance compared to a benchmark, typically a major index like the S&P 500 (SPY) or the Nasdaq 100 (QQQ). A "Strong Stock" is one that exhibits positive price action even when the broader market is flat or declining. For instance, if the S&P 500 drops 5% but a specific tech stock stays flat or rises 1%, that stock is showing immense relative strength, signaling that institutional buyers are supporting the price.

TradingView as a Scanning Engine

TradingView is a cloud-based charting platform that provides a powerful "Stock Screener" tool. Unlike static lists, TradingView allows for real-time filtering based on technical indicators, financial metrics, and price action. The platform's ability to save custom scans means a trader can build a "Strong Stocks" filter once and apply it daily to see which new tickers have entered the "strong" category, ensuring the trader is always trading the most current market leaders.

How It Works / Step-by-Step

Step 1: Setting Up the TradingView Screener

To begin, the trader opens the TradingView Stock Screener. The first step is to define the "Universe" of stocks. This involves selecting the specific market (e.g., USA) and filtering out stocks with low liquidity (e.g., setting a minimum average volume of 500k or 1M shares) to ensure that the stocks identified can be entered and exited without significant slippage.

Step 2: Applying Momentum Filters

The "Strong Stocks" scan requires specific filters to isolate winners. A typical configuration includes:

• Price vs. Moving Averages: Filtering for stocks where the current price is above the 50-day and 200-day Simple Moving Averages (SMA). This ensures the stock is in a confirmed long-term uptrend.
• Performance Metrics: Setting a filter for "Performance 3-Month" or "Performance 6-Month" to be positive, ensuring the stock has a proven track record of growth.
• Volatility/Volume: Adding a filter for "Relative Volume" (RVOL) to find stocks experiencing an unusual surge in interest, which often precedes a major breakout.

Step 3: Visual Verification (The Chart Review)

Once the scan produces a list of candidates, the trader must manually review the charts. The scan identifies the potential, but the chart confirms the setup. Traders look for specific patterns such as "Cup and Handle," "Flat Bases," or "Bull Flags." The goal is to find a stock that is "strong" but currently consolidating, providing a low-risk entry point before the next leg up.

Step 4: Execution and Monitoring

After identifying a strong stock in a consolidation phase, the trader sets an alert for a breakout of the resistance level. Once the price breaks out on high volume, the trade is executed. The position is then monitored using trailing stop-losses to protect capital while allowing the "winner" to run as long as the relative strength remains intact.

Real-World Examples & Use Cases

Scenario 1: The Market Correction Hedge

Imagine the S&P 500 enters a 10% correction. Most stocks are plummeting. However, the "Strong Stocks Scan" reveals a specific semiconductor stock that is only down 2%. When the S&P 500 finally hits a bottom and begins to bounce, this semiconductor stock is the first to hit new all-time highs. The trader who used the scan identifies this "leader" early and captures the fastest move of the recovery.

Scenario 2: Sector Rotation Identification

A trader runs the scan and notices that 15 of the top 20 results are all from the Energy sector. This provides a critical insight: capital is rotating into Energy. Instead of guessing which sector will lead, the trader uses the scan to identify the strongest individual stocks within that leading sector, maximizing the probability of a winning trade.

Scenario 3: The Breakout Play

A trader finds a stock that has been trading sideways for four weeks but remains above its 50-day SMA while the rest of the market is volatile. This "tightness" in price action, combined with the scan's confirmation of strength, suggests a volatility squeeze. The trader enters the trade as the price breaks the upper boundary of the range, riding the momentum as the stock "flies."

Key Insights & Takeaways

• Automation reduces emotion: Using a systematic scan prevents the trader from buying "cheap" stocks that are actually in downtrends (the "falling knife" mistake).
• Relative Strength is the primary indicator: The most profitable stocks are those that outperform the index during market stress.
• Tooling matters: TradingView is the preferred tool for this strategy due to its integrated screening and charting capabilities.
• Filtering is a funnel: The scan is not the trade itself; it is a tool to narrow the universe of thousands of stocks down to a manageable list of high-probability candidates.
• Volume confirms strength: A stock showing strength on low volume is a fluke; strength on high volume indicates institutional accumulation.
• Consistency is key: Running the scan daily or weekly allows a trader to catch winners at the very beginning of their move.

Common Pitfalls / What to Watch Out For

• Buying the Top: A common mistake is buying a stock that has already "flown" too far. Traders should look for strength during consolidation, not after a 50% vertical move.
• Ignoring the Market Trend: While relative strength is powerful, trading "strong stocks" in a severe bear market is riskier than in a bull market. Always consider the overall market regime.
• Over-Filtering: Setting too many filters can result in "zero results." If the scan is too restrictive, the trader might miss great opportunities. It is better to have a slightly broader list and filter manually via charts.
• Ignoring Liquidity: Beginners often find "strong" stocks that are penny stocks with tiny volume. These are dangerous because they can be easily manipulated and are hard to exit.

Review Questions

1. Explain the difference between a stock that is simply "going up" and a stock that exhibits "Relative Strength." Why is the latter more valuable to a swing trader?
2. Describe the workflow from the moment you open the TradingView Screener to the moment you enter a trade. What are the critical checkpoints?
3. If a scan returns 50 stocks that are all above their 200-day SMA, but the overall market is crashing, how should a trader use the "Relative Strength" concept to decide which of those 50 stocks to prioritize?

Further Learning

• Volume Price Analysis (VPA): To complement the scan, learn how to read volume bars to distinguish between institutional buying and retail noise.
• Stage Analysis: Study Stan Weinstein's Stage Analysis to identify which "Stage" (Accumulation, Advancing, Distribution, Declining) the scanned stocks are in.
• Risk Management: Learn about "Position Sizing" and "R-Multiple" to ensure that a single losing trade does not wipe out the gains from the "winners" found via the scan.