Platinum has a variety of rankers available for stocks, industries, and options using fundamental, technical and volatility data. It's a great vehicle for finding trading opportunities and changing up a routine that does not mesh with current market conditions. With a new appreciation for Welles Wilder's Relative Strength Index [RSI] after several conversations with Andrew Cardwell, it seemed to be a great time to explore the RSI ranker.

Bullish & Bearish Ranges

I almost always view momentum indicators when analyzing a chart, and RSI and MACD are the two that have evolved into my favorites. Mr. Cardwell's work with RSI led to a variety of applications for the indicator, including bullish ranges and bearish ranges which regularly appear on my charts. These apply to 14-period RSI setting. A quick summary is provided here, but more detail on Mr. Cardwell's techniques can be found in the Analytical Toolbox series in July 2008.

1. When RSI is moving between 40 and 80, the underlying security is in a bullish phase,
2. When RSI is moving between 20 and 60, the underlying security is in a bearish phase,
3. When RSI is moving between 40 and 60, a trend transition may be taking place.

RSI appears to find support/resistance at the 40 & 60 levels, along with the mid-point line at 50.

Platinum RSI Ranker

The RSI tool in Platinum allows the trader to identify a specific RSI range then rank a group of stocks by the number of days each stock has been inside or outside the range. The number of user-defined fields for the RSI ranker provides great flexibility, including the ability to specify all three ranges in the Bullish & Bearish Ranges list.

These scans were initiated by starting at the Platinum Site Map and selecting "RSI" from the Bollinger Bands / RSI line of the Stock Rankers Tab. The RSI ranker screen allows you to apply various RSI settings to a user-defined stock list that includes optionable securities from major indexes.

Three scans were performed over 65 days to get a look back period of approximately three months. The RSI ranges were broken into three periods and ranked by most days in the range to split out the index as follows:

1. High Bull [HB]: RSI between 80 and 60
2. Low Bear [LB]: RSI between 40 and 20
3. Neutral [N]: RSI between 60 and 40

Figure 1 provides a screen shot of the RSI ranker using a look back period of 65 days, which approximates one quarter's worth of trade data.

Figure 1: RSI Ranker Screen Shot

To see if there were any emerging trends that could be used for a future system or filter, end of month returns were evaluated (18 trading days later). A review of the charts for stocks in the Neutral Scan since the transition could be bullish, bearish or suggest continued sideways movement.

Table 1 provides summary results for 98 stocks in the S&P 100 Index.

Table 1: Summary Results for Three Scans

Given the three month bearish period prior to these scans, the HB Scan only returned one stock: MCD. The LB Scan produced the highest returns; however, they were also the most volatile with the stock that remained in the region for the greatest period of time (35 of 65 days, or 54%) realized the best returns. The next stock with a long duration in this region (26% of the time) was the worst performer.

Stocks in the Neutral Scan required the most assessment with those that appeared to have recently used the RSI 50 level as a support area providing consistent, positive returns and those experiencing resistance at 50 or 60 providing consistent, negative returns.

The 12/4/08 date was specifically chosen. I knew there was a prior bearish period with overall positive returns for the market following. Some light generalizations could be made from assessing the data, but it was really a chart review that clarified things. System oriented traders should complete the scans, view the results and consider RSI parameters that include a rising RSI (or RSI today greater than x days ago) and above certain levels.

The LB Scan as the top group came as a surprise, but I had to remind myself of the larger mix of stocks that resulted from the Neutral Scan, including those that had other indicators favoring a bearish move. While the LB Scans returns were volatile, the results can't be ignored when expanding the review to a greater period of time.

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Clare White
Contributing Writer and Options Strategist
Optionetics.com ~ Your Options Education Site
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