Screening for strength: building the focus list

After this lesson you can build a written screening funnel that turns eight thousand stocks into a watchable focus list — and rebuild it any morning from the rules alone.

The funnel

There are roughly eight thousand listed names in the US alone. Nobody watches eight thousand charts, so everybody runs some filter, whether or not they have ever written it down. This course builds the written kind, stage by stage, with each stage's reason attached.

Stage 1 — tradability. Before strength is even measured, a name has to be safe to trade at your size. A liquidity floor: average daily dollar volume high enough that your position is a drop in it, so getting in and out doesn't move the price or hand a wide spread to somebody else (School I's cost lesson in filter form). A price floor: very low-priced stocks carry proportionally huge spreads and attract manipulation, and the lineage typically works above $10 or so. Between them these two filters remove a great deal of the junk.

Stage 2 — strength. Rank the survivors by RS against the index over a medium window (course 1), and keep the top decile or two. This is the school's core act, which is declining to spend attention on the bottom 80% however interesting the stories down there are.

Stage 3 — structure. Of the strong, keep those in tradable positions: a Stage 2 trend (School III), and, critically, near a base or a rising moving average rather than far above everything. This is the anti-extension test, and School II's arithmetic is what makes it non-negotiable. An extended stock's nearest sane stop level sits miles below, so the division hands you either a tiny position or an oversized risk, with no third option. Extended leaders go onto a "wait for the next setup" list, where they can stay on the screen without being buyable today.

Stage 4 — persistence. Prefer names that have held a high RS rank for weeks over whatever jumped into the top decile yesterday. One earnings pop can gate-crash any ranking, while sustained rank is what the institutional-accumulation logic (course 1) actually predicts. A simple tenure rule, N weeks on the list before full trust, does most of that filtering.

What's left is the focus list, typically a few dozen names that are strong, structurally tradable and few enough to watch. The daily routine turns into checking that list: regime first (course 5), then the groups (course 4), then the handful of focus names sitting near an actionable setup.

The properties that matter

Two design rules keep a focus list honest, and both of them reach back from School VIII's material. Written criteria, mechanically applied: every filter above is a number and a comparison, so the list is reproducible, and you or anyone else could rebuild today's list from the rules and get the same names. The moment "I just like it" adds a name, the list can no longer be rebuilt from the rules, and its output stops being measurable. And scheduled refresh: rerun it on a fixed rhythm (weekly suits the timeframes here), so names enter and leave by rule. Stocks you own that fall off the list become exits to manage (School V). Quietly re-adding them hands the decision back to the part of you the list was built to overrule.

Check yourself

1. Why does the liquidity floor come before any strength measurement? (Strength in an untradable name is a trap — if your size moves the price or the spread eats the edge, nothing downstream matters.)
2. A leader you love is 45% above its 50-day average. Walk the anti-extension logic. (The nearest technically-sane stop is enormously far; sizing to 1R gives a sliver of a position, or tempts an indefensible closer stop. Wait for the next base — the leader stays on the watch list, untouchable today.)
3. What does the tenure rule protect against? (One-event wonders gate-crashing the ranking. The accumulation thesis predicts sustained rank, so sustained rank is what earns trust.)

The idea this lesson installs

A focus list is written rules, rerun on a schedule.

Next: Course 7 — "The lineage."