The Code Red Template is the opposite of the ‘Code Blue’ template.
Whereas Code Blue is designed to locate stocks that are ready for a bullish move, Code Red locates stocks that are ready for a bearish move.
The terms ‘Code Blue’ and ‘Code Red’ come from the chart indicators that are used in part of the scanning process. Here’s an example of a Code Red signal:
The signal is fired when at least 3 out of 4 of the following turn red:
- Bongo Weekly
- Bongo Daily
- Force 13
- Force 2
In addition a 5 or 10 period reverse pocket pivot is required and the stock must be bouncing off of one of the moving averages (SMA 10, 50, 200, EMA 20, 65).
The bounce off of a moving average is detected by the proximity of the ‘high’ of the bar to the moving average.
The new ‘Code Red’ template and corresponding Chart Layout in EdgeRater allow you to quickly scan for these setups. Here’s an example output from the scan. The predefined sorts position stocks that are exhibiting ‘Code Red’ to the top of the list. The -2% sort brings all stocks that meet the criteria and that have highs within 2% of a key moving average to the top of the list. The -4% sort goes out to within 4% of a key moving average and will find more stocks but they may be too extended already.
Here’s an example of the scan output:
When the template is run the scan is automatically sorted with code red stocks within 2% of a moving average at the top of the list. In addition, within that sort the stocks are sorted with ‘Big and Little Kahunas’ at the top. You can click on any column heading to sort any other way.
You can double click on any row to see a chart of the stock with the signal bar hilighted. There is also a new ‘Chart Layout’ under the ‘Morales & Kacher’ group called ‘Code Red’ which when selected shows the chart layout shown above.