How to Combine Daily and Intraday Strength | thinkScript Studies on thinkorswim

Introduction

In this article, we will explore how to identify strong stocks by combining daily trends with intraday strength, utilizing the powerful thinkScript programming language available in the thinkorswim platform. By analyzing specific moving averages and the Volume Weighted Average Price (VWAP), you can pinpoint potential entry points for your trades.

Market Overview

As we venture into this analysis, it's essential to recognize the current market conditions. Recent performance of the S&P 500 Index indicates a significant pullback, affecting long positions. Thus, finding sectors or stocks exhibiting strength in this turbulent market becomes crucial.

Identifying Strength: Moving Averages

A foundational approach to assess strength is monitoring the price movement concerning short- and long-term moving averages. This article will focus on the 9-period and 21-period moving averages. If the price of a stock is above both the 9 and 21 moving averages, it indicates a potentially bullish trend.

In a prior class, we constructed a thinkScript that alerts us to instances where the 9-period moving average crosses above the 21-period moving average. This crossover serves as a key signal that requires careful observation.

Script Adjustments

Upon reviewing our previous script, we noted that it needed refinement to address a few outliers. The adjustments allow us to filter stocks that have recently crossed over the 9 and 21 moving averages while also confirming that the price remains above these averages.

Here is a brief overview of the steps taken to enhance the script:

1. Define Moving Average Crossover: First, we define a moving average crossover condition within the last three trading days.
2. Price Above Moving Averages: Next, we will ensure that the stock's closing price is greater than both the short and long moving averages.
3. Plot Conditions: Finally, we modify the plotting conditions to only show stocks meeting both criteria.

Incorporating VWAP

To gain deeper insights into trading opportunities, we aim to integrate VWAP into our analysis. The VWAP serves as a benchmark that reflects the average trading price of a stock throughout the trading day, adjusted for volume.

Steps to Tie it Together

1. Add VWAP to the Daily Chart: Utilize the built-in VWAP indicator to observe how the price interacts with the VWAP line.
2. Intraday Confirmation: Observe intraday movements (e.g., on a 30-minute or 10-minute chart) to see if the price breaks above the VWAP.
3. Identify Strong Entry Points: Combine the daily trend analysis with intraday VWAP movements to find strong entry points.

Example Implementation

Consider Apple (AAPL) as an example. Assess the daily chart to identify the moving average crossover and check the VWAP for intraday performance. If the price breaks above the VWAP line after a bullish trend has been identified, it may indicate a strong entry point, benefiting from momentum.

Conclusion

By combining the analysis of daily trends with intraday VWAP, traders can create a robust strategy to capture significant moves in the market. It is imperative to run the scripts provided and practice applying these concepts to your trading decisions.

Keywords

• thinkScript
• moving averages
• 9 and 21 crossover
• Volume Weighted Average Price (VWAP)
• stock trading
• intraday strength
• market analysis

FAQ

Q: What is the significance of the 9 and 21 moving averages?
A: The crossover of these moving averages can signal a potential change in trend, indicating bullish or bearish movements in stock prices.

Q: How does the VWAP help traders?
A: The VWAP gives traders insight into the average price a stock has traded at throughout the day, helping confirm trends and identify entry points.

Q: Can thinkScript be used to automate trading strategies?
A: Yes, thinkScript enables traders to create custom scans, alerts, and strategies based on specific conditions tailored to their trading preferences.

Q: What should I look for to confirm a trade entry?
A: You should look for the price to be above significant moving averages while also breaking above the VWAP on an intraday chart to confirm strength.

Q: Is using multiple time frames effective in trading?
A: Yes, analyzing multiple time frames allows traders to understand both the larger trend and the finer intraday movements, increasing the likelihood of successful trades.