Reversal Finder

What it is

Reversal Finder scans the entire ticker universe daily using a 9-component "Dumb Money" composite score to identify stocks that are statistically stretched — either overbought (potential local top) or oversold (potential local bottom). It is built for options premium sellers: sell Covered Calls on tops, sell Cash-Secured Puts on bottoms.

How it works

Each stock receives a composite score from −7 to +7 based on 7 independent indicators. A signal fires only on the transition bar — the day the stock first crosses the threshold, not every day it stays there.

• +3 or higher: Potential Top — sell Covered Calls
• −3 or lower: Potential Bottom — sell Cash-Secured Puts

The 7 components

1. Keltner Channel — price closes outside a volatility envelope (EMA basis + ATR × 2).
2. RSI (6-period) — RSI ≥ 75 = overbought, RSI ≤ 25 = oversold.
3. RSI Divergence Bonus — price makes a higher high while RSI makes a lower high (bearish), or the opposite (bullish).
4. Stochastic RSI (14-period) — both %K and %D ≥ 70 = overbought, both ≤ 20 = oversold.
5. Bollinger Band %B — %B ≥ 0.90 = near upper band extreme, %B ≤ 0.10 = near lower band extreme.
6. MACD Histogram Exhaustion — detects when momentum is waning.
7. Volume Surge — volume ≥ 2× the 14-day average MA.

Sell Covered Calls (Tops)

When a stock triggers a Potential Top signal (+3 or higher):

• The stock is overbought across multiple timeframes simultaneously
• Sell a covered call 1-2 strikes OTM expiring in 1-2 weeks
• Target a return to the mean - you don't need a big move, just stagnation or slight pullback
• Works best on tickers you already own or are willing to hold

Sell Cash-Secured Puts (Bottoms)

When a stock triggers a Potential Bottom signal (-3 or lower):

• The stock is oversold across multiple indicators simultaneously
• Sell a cash-secured put at a strike you'd be happy buying the shares at
• Collect premium while waiting for the bounce, or accumulate shares at a discount
• Works best in stocks with strong fundamentals that are temporarily beaten down

Scan Schedule

• 9:45 AM ET - Early scan catches gap-down opens and extreme premarket moves. Note: volume data is partial at this hour.
• 3:30 PM ET - Pre-close scan uses full-day data. Higher signal quality - this is the primary scan.

Important Caveats

• Reversal signals fail in strong trending markets. A +3 stock in a raging bull market can keep going to +5.
• The 9:45 AM scan uses partial-day volume - the volume component may read noisy. Prefer the 3:30 PM scan for full conviction.
• Always check GEX and market regime before trading. Negative GEX = choppy, mean reversion is more reliable. Positive GEX = trending, signals fail more often.