Technical analysis logic and scoring
Our technical analysis system combines multiple indicators and patterns to identify high-probability trading setups. The methodology focuses on three core areas: breakout detection, options play suggestions, and entry point assessment.
The breakout scanner assigns a composite score (0-100) based on multiple technical signals. Higher scores indicate stronger breakout potential.
| Signal | Max Points | Description |
|---|---|---|
| Volume Surge | 25 | Volume > 1.5x 20-day average with accumulation pattern |
| Bollinger Squeeze | 20 | BB width in lowest 25th percentile (volatility compression) |
| Resistance Proximity | 20 | Within 3% of key resistance with higher lows forming |
| EMA Alignment | 20 | Price above EMAs, stacked EMAs (9 > 21 > 50), recent crossover |
| ADX Breakout | 15 | ADX rising from <20, bullish DMI crossover (+DI > -DI) |
| Consolidation | 20 | Days in tight range with volume contraction (base building) |
| Pattern/Signal | Points | Detection Method |
|---|---|---|
| Cup & Handle | +15 | U-shaped price curve with handle consolidation near highs |
| Ascending Triangle | +10 | Flat resistance with rising support trendline |
| Bull Flag | +10 | Sharp upward impulse followed by tight consolidation channel |
| Low IV Rank | +10 | IV rank <30 (cheap options, expansion expected) |
| TTM Squeeze | +15 | BB inside Keltner Channel (squeeze firing, momentum shift) |
| ATR Compression | +10 | ATR in lowest 20th percentile (coiled spring setup) |
Our options strategy focuses on conservative, single-leg positions with defined risk. We only suggest HIGH confidence plays that meet strict criteria.
| Parameter | Value | Reasoning |
|---|---|---|
| DTE Range | 30-45 days | Avoids rapid theta decay, gives time for thesis to play out |
| Delta Range | 0.30-0.50 | Balances probability of profit with leverage |
| Stop Loss | 50% of premium | Conservative risk management, limits max loss |
| Price Target | Based on 1.5x ATR | Realistic profit target tied to expected volatility |
| Hold Period | ~60% of DTE (max 21 days) | Exit before steep theta decay curve |
Before executing trades, our AI validates them using pure technical analysis to assess quality and provide actionable recommendations.
| Factor | Points | Condition |
|---|---|---|
| Trend Aligned | +30 | Trade direction matches current trend |
| Entry Favorable | +25 | Price near support with good R:R |
| Entry Neutral | +10 | Price in mid-range |
| Risk/Reward ≥2x | +25 | Target/Stop ratio is 2:1 or better |
| Risk/Reward ≥1.5x | +15 | Target/Stop ratio is 1.5:1 |
| Mid-Range Position | +20 | Price between 30-70% of range |
Starting score: 50 (neutral)
| Factor | Points | Condition |
|---|---|---|
| Trend Aligned | +15 to +25 | CALL + bullish or PUT + bearish (scaled by strength) |
| Trend Against | -20 | CALL + bearish or PUT + bullish |
| RSI Favorable | +15 | Oversold (<35) for calls, Overbought (>65) for puts |
| RSI Unfavorable | -15 | Overbought (>70) for calls, Oversold (<30) for puts |
| Position Favorable | +10 | Near support for calls, near resistance for puts |
| Position Unfavorable | -10 | Near resistance for calls, near support for puts |
The entry assessment evaluates the current price position relative to key technical levels to determine if now is a favorable time to enter a position.
This analysis is for educational and informational purposes only. It is not financial advice. Options trading involves substantial risk of loss and is not suitable for all investors. Past performance does not guarantee future results. Always do your own research and consult with a qualified financial advisor before making investment decisions.