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Scanning Technique: Reading the Tape

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Definition The scanning technique assembles the market read without charts: count who is taking out prior highs vs. prior lows on each timeframe, then check how concentrated the list is by sector. The market must trade in the direction of the most 2s, so the side with the concentration is the read.

Why it works: a high concentration of names breaking the same direction is a simultaneous break: evidence of institutions buying or selling across the board rather than picking individual names. From the course: “I can tell you what’s going on without looking at any charts.”

The monthly scan

When: the start of each new month. Scan: who is taking out last month’s highs, sorted by volume (not because volume is a signal, but to surface the big names and reveal sector concentration). Then flip it: who is taking out last month’s lows. Heavy concentration on the high side plus “a who’s-who of nobody” on the low side means the month is going up, and the sector of the breakout names tells you what is being bought. Monthly simultaneous breaks are the preferred ones because there is all month to go after them.

Daily and weekly: confirm or negate the month

Once the monthly picture is set, the days and weeks constantly confirm or negate it. Scan: who is taking out the previous day’s highs vs. lows. A high concentration on one side is the simultaneous break. Continuity changes when the next bar prints a 2-2 reversal or a 2 going 3; a cluster of names doing it in one sector is a sector-level simultaneous break, not a one-off, so check the rest of the group. Weekend scan: sort for inside weeks and names close to taking out a high or low. Those set up 2-1-2 simultaneous breaks and show what is loaded for Monday.

SPY December 2024: week 1 goes 2u and confirms the monthly group, week 2 goes 2d through week 1 low and negates it, flipping December red $580 $585 $590 $595 $600 $605 $610 Daily Weekly Monthly Nov 25 Dec 02 Dec 09 Dec 16 Nov 25 W1 W2 W3 December Dec open 602.97 SPY, late November into December 2024 — real data, day by day week 1 breaks the prior week’s high — 2u, green: the weekly group confirms the monthly group week 2 takes week 1’s low — 2d: the weekly group negates week 1 and drags the last sale through the December open the negation was the early warning — week 3 breaks down and December flips redTheStrat.AI
SPY, December 2024: once the monthly picture is set, the weeks confirm or negate it: week 1 confirms, week 2 prints the 2-2 reversal that changes continuity, and December follows it lower.

The after-a-down-day tell

After a directional down day, run “who is taking out yesterday’s highs.” Names reclaiming yesterday’s highs take out yesterday’s shorts, which is pivot machine gun fuel. When many names fail to take out yesterday’s highs, the power is absent, and that is the tell that a rally is weakening.

Intraday scans

Up/down the most from the open: the primary intraday filter, tied to the opening price. Raw percentage change misleads: a name up 30% but down 5 cents from the open is doing nothing, while a name up $7 from the open and near the high of day was opened and kept getting bought, and that is the one that matters. Up/down the most by percentage: usable, but check volume to avoid being faked out by a thin print. Sector concentration applies on any timeframe (60-minute, daily, monthly) and intraday reads interact with the flip at the bottom of the hour.

Related reads while scanning: a 2-up day followed by a day that takes the low back can be a compound 3 the chart is not drawing; ETF breaks are read through their concentration. See know your ETFs.

Frequently asked

What counts as a simultaneous break in a scan?

A high concentration of names breaking the same side: taking out yesterday’s (or last week’s, last month’s) highs or lows together. When roughly 90% of names do the same thing at once, it is very difficult to turn around, and it signals institutions acting across the board.

Related: Simultaneous Breaks · Scan Recipes · Direction of the Most 2s · Confirming & Negating · Know Your ETFs
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TheStrat was developed by Rob Smith. These docs are written by Alex Sopa (AlexsOptions) and quote his teaching. Work in progress: spotted an error? Tell Alex.

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