The Kullamägi Scan: Engineering Your Scanners to Find Explosive Momentum Stocks

A successful momentum trading system is not built on discretionary picks or chasing hot tips. It is an industrial-grade process, and the engine of that process is a systematic, repeatable, and robust scanning methodology. Kristjan Kullamägi’s ability to consistently find stocks on the cusp of explosive moves is not magic; it is the result of meticulously engineered scans that filter a universe of thousands of stocks down to a manageable list of high-potential candidates. For the experienced trader, mastering the art of scanning is a important step toward achieving consistent results. This involves translating the core principles of the breakout strategy—strong fundamentals, effective price action, and institutional interest—into the logical language of a stock screener.

First, a trader must define their universe of stocks. Kullamägi primarily focuses on the NASDAQ, with an emphasis on US-based common stocks. The first and most important filter is to eliminate the noise. This means removing illiquid and low-priced securities that are prone to manipulation and are generally ignored by the institutional players whose sponsorship is important for a sustained move. A common set of baseline filters would include:

• Minimum Share Price: A filter to include stocks trading above $5 or $10. This immediately removes most speculative penny stocks and highly distressed companies.
• Minimum Average Dollar Volume: This is a important liquidity filter. A minimum threshold, such as a 50-day average dollar volume of at least $20 million, ensures that a trader can enter and exit a position of significant size without dramatically impacting the stock’s price. This is a proxy for institutional interest.
• Exchange: Specifying major exchanges like NASDAQ and NYSE and excluding OTC markets further refines the focus to more established companies.

With a clean universe, the next step is to scan for the specific characteristics of a Kullamägi-style momentum leader. The first layer of this is price and volume action. The goal is to find stocks that are already demonstrating significant strength. This is not about bottom-fishing or finding beaten-down names. It is about identifying the market's strongest players. Key criteria include:

• Proximity to 52-Week Highs: The scan should look for stocks trading within a certain percentage of their 52-week high, for example, within 10-15%. Stocks making new highs are, by definition, in strong uptrends and have no overhead resistance from disgruntled buyers who are looking to sell at breakeven.
• Performance: Scanning for stocks that are among the top performers over the last 1, 3, or 6 months is a direct way to isolate momentum. For example, a scan could look for stocks that have appreciated by at least 30% in the last 3 months.
• Volume Surges: A key indicator of recent institutional interest is a surge in volume. A scan can look for stocks where the current day’s volume or the 10-day average volume is significantly higher than the 50-day average volume.

Relative Strength (RS) is a cornerstone of the Kullamägi scanning process. A stock’s RS measures its performance against a benchmark, typically the S&P 500. A high RS rating indicates that the stock is outperforming the broader market. This is a important concept: in a healthy market, the biggest winners are almost always the stocks that are leading the market higher, not just following it. Many charting platforms, like TC2000 and Deepvue, provide a built-in RS rating. A typical Kullamägi scan will filter for stocks with an RS rating above a certain threshold, such as 85 or 90, meaning the stock has outperformed 85% or 90% of all other stocks over a given period. This ensures that the trader is focusing their capital on the market’s elite leaders.

While the strategy is primarily technical, it is fortified by a layer of fundamental criteria. Strong fundamentals provide the fuel for a sustained trend. Institutions don’t pile into companies with deteriorating businesses. They are looking for growth. The key fundamental metrics to scan for are:

• Earnings Per Share (EPS) Growth: Look for significant quarter-over-quarter (QoQ) and year-over-year (YoY) growth in EPS. A common filter might be a minimum of 25% EPS growth in the most recent quarter.
• Sales Growth: Strong sales growth is equally important, as it shows that the company’s products or services are in high demand. A scan can filter for companies with accelerating sales growth over the past several quarters.

Putting these elements together, a sample scan in a platform like TC2000 or TradingView might look for a stock that is: trading above $10, has an average dollar volume over $25 million, is within 10% of its 52-week high, has an RS rating over 90, and reported EPS growth of over 30% in the last quarter. The final step in the process is not to blindly buy the stocks that appear on the scan. The scan is a tool for generating ideas. The output of the scan is a watchlist of candidates that require further, manual chart analysis. The trader must then go through each chart, looking for the clean “staircase” patterns, tight consolidations, and specific pivot points that signal a high-probability entry. This combination of systematic scanning and discretionary chart analysis is the engine that powers the Kullamägi momentum strategy.