Rolling Stock Criteria

When ever I mention the stock application I'm working on, anyone who considers themselves at least an amateur investor brings up rolling stocks or wave theory. After reading various account of these stocks, there is no consensus of what characteristics constitute a rolling stock. The general rule that applies is that a stock price moves between an upper bound (resistance) and a lower bound (support). I've wanted to identify these stocks automatically and perhaps trade them. In a previous post, we identified stock OHB, which tanked! This was intentionally identified because it's a stock that is rolling down.

Rolling stocks aren't easy to identify, characteristics can change on a whim. But, let's try anyway. The 5 day SMA seems like a good indicator to use to find the upper and lower bounds of a rolling stock. My criteria is that is must take at least 5 days to move from high to low bounds, and that at least 2 rolls must be in the immediate history for a stock to qualify as rolling. But, what if a stock is rolling down? The high price is decreasing with each roll? To find out, let's identify the 2 highs previous to the stocks current price. Lets call them prevHigh and pPrevHigh for lack of anything better. If the stock are rolling down, the pPrevHigh will be less than prevHigh. So, let's take the value of prevHigh and add the different from prevHigh and pPrevHigh. This value is the forecasted next high price of the stock.

Now, if a stock is starting to roll up, and the difference from the current price and the forecasted high price is greater than 20%, this is a stock to flag for consideration. With this scan, rolling stocks such as OHB from the previous post will not be identified because the forecasted high value would have been less than 20% of the stocks current value.

The stocks that show up on this rolling stock scan today are:
IOPM.OB
TAG

TAG is also increasing in value due to an earning surprise announcement on April 5th. Stocks such as these receive extra attention on blogs and websites (other than this one) which could serve as a catalyst for an increasing stock price.