[TTI] Minervini STEM Model📜 ––––HISTORY & CREDITS 🏦
Introducing the Minervini STEM Model, an innovative indicator developed by Mark Minervini, an experienced trader and author renowned for his expertise in gauging the quality of breakouts. The Stock Tactical Environment Model (STEM) is designed to assess the trading environment based on the performance and setup of stocks, helping traders navigate various market conditions with ease.
🎯 ––––WHAT IT DOES 💡
The Minervini STEM Model measures the quality of breakouts in the stock market and provides valuable insights into the trading environment. The model is subjective based on the performance of the Mark Minervini Focus List on a 5 day rolling basis.
• What is the Mark Minervini Focus List?
- This is a private weekly watchlist of all the best setups provided by Mark Minervini in his Private Access Group
• How is the quality of breakouts measured?
- This is the subjective part of the indicator. A good breakout is one that has definite clear of a pivot, with a good close and strong volume. From then on there are strong follow through buys (consecutive up days with new highs) again with good (above average) volume signatures. When stocks start moving in earnest and together and breakouts happen with quality technical characteristics and keep on holding the new highs, then we have a good quality breakouts, otherwise if there are 'pop and drops' (breakout met with subsequent selling on the next days) - we have a bad quality breakouts.
• What is the 5 day rolling basis?
- As part of the methodology, I have included, how are the watchlist (Focus List) is performing on subsequent on the next 5 days. This means if we have 10 stocks on Friday, how many did close up in the following 5 days, do we have improvement compared to the previous week and the week before that, is there an overall trend of stocks gaining value or not. This also measures the quality of the bearjouts
🚨IMPORTANT! The model is largely subjective based on the various factors. Largely, I look at Mark Minervini's focus list and determine how it is performing on a 5 day rolling basis. Depending on how many of the Focus List stocks are closing down for the 5 day period (e.g. less than 60%) and how are all cumulatively performing, I adjust the model. It generates three distinct color-coded signals to indicate the effectiveness of breakouts and the overall market condition:
Color meanings
🟩Green: Breakouts are working well, indicating an easy dollar environment.
🟨Orange: The market is selective or highly rotational, signalling a need for caution.
🟥Red: Breakouts are not working well, suggesting a hard penny environment and high risk.
This color-coded system allows traders to quickly assess the market's health and adjust their trading strategies accordingly.
🛠️ ––––HOW TO USE IT 🔧
To effectively use the Minervini STEM Model, follow these steps:
1.Load the Minervini STEM Model script into your preferred charting platform.
2.Observe the color-coded signals displayed on your chart.
Interpret the signals as follows:
🟩Green: Breakouts are working well. Consider aggressive trading and increasing exposure.
🟨Orange: The market is selective or highly rotational. Exercise caution when trading and be selective with your stock setups.
🟥Red: Breakouts are not working well, and risk is high. Adopt maximum caution and consider reducing exposure or staying small until you gain traction.
By incorporating the Minervini STEM Model into your trading strategy, you can better gauge the quality of breakouts and the overall market condition, enabling you to make informed decisions on your trades. Remember to use this tool in conjunction with other technical indicators and risk management practices to optimize your success.
Environment
Market Breadth - Secondary IndicatorMarket Breath is the equilibrium between number of stocks in advance to those in a decline, in other words a method to determine the current market environment. In a positive phase bullish setups will have improved probabilities and presence, whereas in a bearish phase the opposite would be true.
The primary indicator is the main tool used to identify whether the market is favorable for bullish- or bearish setups. The secondary indicator is complementary, with the purpose to calculate the intensity of each phase. In other words, overbought or oversold conditons.
The calculations are made based on the MMFI (% of stocks above 50 DMA).
- Red Column: Value below 21 would be considered oversold, where 10 < would be extreme / capitulation.
- Green Column: Value above 72 would be considered overbought, however in a stable bullish phase would on the contrary indicate positive acceleration.
There are also prints of dots that are created around / end of these extremes, which can indicate a reversal attempt. This will be printed when there is a countertrend move in the MMFI, VIX and SPY from an extreme value.
- Red Dots: Countertrend (down expansion) from a bullish phase.
- Green Dots: Countertrend (up expansion) from a bearish phase.
- Black Dots: Countertrend (up expansion) from an extreme / deep bearish phase.
How To Use
Use the primary indicator to note whether the market is more favorable for bullish- or bearish setups. Then look at the secondary breadth indicator and note whether there are extreme numbers and take that into account with a discretionary perspective. Example In case the market is in a bearish phase, have extended to the downside for several weeks and the primary breadth indicator is bearish. But he secondary show oversold levels with reversal prints, one should consider to be more careful on short side to risk of mean reversion. In simple terms these can be used to determine whether the current market is appropriate for selected setups.
Market Breadth - Primary IndicatorMarket Breath is the equilibrium between number of stocks in advance to those in a decline, in other words a method to determine the current market environment. In a positive phase bullish setups will have improved probabilities and presence, whereas in a bearish phase the opposite would be true.
The primary indicator measure the trend in SPY and correlation between different EMA's.
- Green Columns: Positive Breadth
- Red Columns: Negative Breadth
This indicator can be combined with the secondary breadth indicator to further note excessive movement and risk of mean reversion.
