Over at WallStreak there has been a lot of discussion about Holy Grails and how to spot them. During this discussion, there were a lot of traders interested in scanning for the setup. Some traders like Stewie simply follow specific stocks and wait for Holy Grails to form before taking a trade. But wouldn’t it be great if you could have an automated scanner look for the setup for you?

Although I do watch a list of specific stocks for Holy Grails, I also have a scanner setup that looks over the entire market (or specific watch lists) for Holy Grails. The system I use is very simple yet effective. I look for stocks that are crossing above or below the 20-SMA. The software automatically updates the list on the close of every bar so I have the most up to date information. After looking over the list I use market trend, volume, MFI, and pattern recognition to determine which trades to take. Here is a screen shot of the software in action.

This image is huge due to the fact that I span the software window across my two 19′ monitors with a 2560 x 1024 resolution.

On the left side you can see that I have 108 stocks in my Day Trades watchlist. The scanner only searches through the stocks in your watchlist, which you can customize. All of the stocks that have a “green light ” are potential longs and all of the stocks that have a “red light” are potential shorts. Just click on the ticker to see a chart. You can sort the list alphabetically by the symbol, or it can be sorted based on the criteria you have set for the scan. On the right side I have a chart of DE with volume, Money Flow Index, and the 20-SMA. At the bottom of the chart (above MFI) the software plots vertical bars at potential entries (red for shorts and green for longs).

This is my scanning system in a nutshell. Very basic, very simple, and very easy to use. As with any system, you will get a lot of false signals. To keep from taking too many false signals, I use MFI and price formations to get a better feel for setups that will and will not work. I like to see a wedge form as price intersects the 20-SMA and I also look for extremes in MFI (below 20 for longs and above 80 for shorts). Divergences between price and MFI can also be a good tell for potential price moves.

Now for the software details. The program I use is called Blocks Strategy Trader 3.0 and it is put out by Worden Brothers who also developed TeleChart. Here is a video that will give you an idea of what all you can do with the software. They are still in beta testing for version 3.0 and when you attend one of their nationwide seminars they give you a free copy of the software at the door. The monthly fees are between $40 and $50 per month depending on what data packages you want. I would highly recommend you give Blocks a try.