Finding Stocks Below the Linear Regression Lower Line Using Chartink

Finding Stocks Below the Linear Regression Lower Line Using Chartink

The Linear Regression Channel (LRC) is a powerful technical analysis tool that helps identify the current price trend and potential overextensions. The channel consists of a central linear regression line and upper and lower bands, typically set one or two standard deviations away.

A stock trading below the lower line of the linear regression channel suggests that its price is significantly below its current "equilibrium" or average trend line, which could indicate a potential reversal opportunity (if you're a buyer) or the start of a strong downward move (if you're a short-seller).

The Chartink Scan Logic

You can use the following conditions to create a custom stock screener on Chartink.com that finds stocks currently trading below the lower line of a 100-period linear regression channel:

Segment	Timeframe	Indicator	Condition	Value/Indicator
Cash	Daily	Close	Less than or equal to	Linear Regression Lower Band (period: 100, standard deviations: 2)
Cash	Daily	Volume	Greater than	100000 (to ensure liquidity)
Cash	Daily	Market Cap	Greater than	500 (optional: filter for mid/large caps)

To implement this on the Chartink platform:

1. Navigate to the Chartink Screener page.
2. Set the segment to Cash (or Futures, as per your preference).
3. Add the clauses using the dropdown menus:
   • Select close for the first clause, then choose less than equal to, and select Linear Regression Lower Band as the second indicator.
   • Specify the parameters for the Linear Regression Lower Band (e.g., period: 100, deviations: 2).
   • Add other conditions like Volume and Market Cap to refine your results.
4. Click Scan to see the list of stocks that meet your criteria. You can save the screener for future use.

Interpretation and Strategy

• Potential Undervaluation: Stocks appearing on this list might be temporarily oversold or undervalued relative to their long-term trend, potentially offering a buying opportunity if other indicators (like RSI or stochastic) show oversold signals and you anticipate a mean reversion.
• Strong Downtrend Signal: Alternatively, a strong breakdown below the lower band with high volume can signal the beginning of a powerful downward trend, confirming selling pressure.
• Confirmation is Key: This scanner should be used as a starting point. Always conduct further analysis using chart patterns and other technical indicators before making any trading decisions. The historical performance of such a strategy should also be backtested.