Weve been working on studying general market direction for several weeks now and I hope that you are comfortable with that now. Today though, I wanted to spend some time on how to screen for stocks using the IBD. Later when I get a chance, Ill update my post called How To Use The IBD: The Complete Guide to reflect this post. Its important to note that there are probably thousands of ways to screen for stocks. And, Im sure that even once I lay out how I am going to start screening on a daily basis, that Ill change and refine it later as I get more experienced. While the screening methods might change, one thing wont. Thats the need to find stocks that meet your criteria to potentially invest in on a daily basis.

William ONeil breaks down his screening process into two parts:

1. Fundamental screens Fundamental screens check for EPS and RS ratings, Return on equity, etc.
2. Technical screens Technical screens use stock charts to look for the best buy points.

Please note that there are TWO steps here and just because a stock meets a fundamental screen doesnt mean that its the best stock to buy now. Thats why you need to verify that a stock you like fundamentally also looks good technically. Were going to start with the first step and review the fundamental screens. Once I get more experience, then Ill move on to improving my chart analysis.

But again, please note that just because a stock makes a screen doesnt mean that if you bought it that it would go up. You have to buy it at the right time. Thats what your technical analysis will show you.

When you are using your screening tools, visualize yourself like the gold prospector along the river. See yourself sifting through the dirt looking for pieces of gold. Screening for stocks is just a way to sift through the thousands of stocks available to reduce the number to a managable number that you can review on a daily basis.

Rather than recreate the wheel, lets start with what ONeil has already set up for us. As a subscriber to the eIBD, Ive already got access to several screens customized specifically to the CANSLIM investor. As my starting setup, Im going to focus on five daily screens and see what stocks start popping up on my radar.

Here they are:

1. Stocks reaching new 52 week highs Everyday, you can find a list of these in the paper each day. Stock market winners pass through this screen on their way to higher highs. Stocks that reach new highs often go higher much higher. Ill limit my screen to the top six industry groups and those over 80 EPS.
2. Stocks with heavy volume This daily screen come from the Stocks On The Move feature that is on the front page of the Making Money section. Heavier volume is indicative of institutional sponsorship a must if Im going to see big gains in price. For this screen, Im only going to look at stocks that are 80 and higher in both EPS and RS ratings. These are conveniently in bold.
3. Stocks trading within 15% of their 52 week highs Each and every day, the Stocks in the News section highlights 20 stocks 10 from the NYSE and 10 from the NASDAQ.
4. Stocks with strong price action The Timesaver Table summarizes stocks up at least 1 point or making new price highs.
5. Stocks with earnings increase over 25% and accelerating Each day I will check for stocks that have over 25% increase in earnings per share and that are also accelerating.

These daily screens will bring up the cream of the crop and the first thing that I want to do is just get the mechanics of going through them each and every day.

Once I identify stocks that pass the above screens, I will then reduce them further by eliminating the ones that do not meet these minimum thresholds:

• EPS and RS ratings over 80
• SMR, Accumulation/Distribution, Group Relative strength of at least an A or B
• At least 100,000 in average daily volume
• Earnings per share over 25% in the last quarter
• Sales increase of over 25% in the last quarter

In addition to the daily screens, there are also several screens that I will go through that the IBD runs once a week. These are:

• IBD 100 Published on Monday
• IBD Big Cap 20 Published on Tuesday
• IBD Top 200 Composite Stocks Published on Thursday
• IBD Weekly Review Published on Friday

Because its possible that the stocks that comprise these screens may remain the same from week to week, what Im going to do is look for stocks that have a price increase of 2% or more and a volume increase of 100% or more. If they do, then Ill use the above additional screening criteria above to reduce them futher.

Once, I do this, this should give me a handful of stocks that I can focus on each day.

So, thats how I am going to screen for stocks to buy each day. As I update and refine my screens, I will update that here. Let me know if you have any tips or suggestions. Once I get my screening process ironed out, the next step for me is to iron out how to manage my stock market investing watch list. Thats for another day.