Webster Power Trend
Webster Power Trend is a technical trend state machine that identifies stocks in established uptrends based on moving average conditions. The methodology is derived from the work of Mike Webster and adapted for systematic daily screening.
Overview
The Webster Power Trend tracks stocks through a series of technical conditions that must align for a "power trend" to activate. Once active, the trend is monitored for warning signs and breach conditions that signal when the trend may be ending.
What This Feature Provides
- Trend State Detection — Current state for each symbol (inactive, active, warning, breached)
- Condition Monitoring — Real-time status of each required condition
- Historical Tracking — When trends activated and how long they've persisted
- Breach Alerts — Early warning when trends are at risk
- Universe Coverage — Analysis across S&P 500 and Nasdaq 100 components
Why It Matters
The Webster Power Trend identifies:
- Institutional-quality uptrends — Stocks with proper technical structure
- Early trend participation — Entry signals when conditions align
- Exit timing — Warning and breach signals for position management
- Market breadth — How many stocks are in power trends indicates market health
The Four Conditions
For a power trend to activate, four conditions must be satisfied simultaneously:
Condition A: Price Above 21-Day EMA
The daily low must remain above the 21-day Exponential Moving Average for a minimum streak (default: 10 consecutive days).
Low > EMA(21) for ≥10 consecutive days
Interpretation: Price is consistently trading above short-term support, indicating strong buying pressure with no meaningful pullbacks.
Condition B: 21-Day EMA Above 50-Day SMA
The 21-day EMA must remain above the 50-day SMA for a minimum streak (default: 5 consecutive days).
EMA(21) > SMA(50) for ≥5 consecutive days
Interpretation: Short-term momentum (21 EMA) is leading intermediate-term trend (50 SMA), confirming trend acceleration.
Condition C: 50-Day SMA Uptrend
The 50-day SMA must be rising compared to a lookback period (default: 10 days).
SMA(50, today) > SMA(50, 10 days ago)
Interpretation: The intermediate-term trend is established and rising, not flat or declining.
Condition D: Trigger Candle
On the day all conditions align, there must be a "green" candle (close above open).
Close > Open
Interpretation: Bullish price action confirms the technical setup on the day of activation.
Trend States
Inactive
None or not all conditions are met. The stock is not in a power trend.
Action: Watch list only. Wait for conditions to align.
Active
All four conditions are met. The power trend is confirmed.
Action: Potential long entry. Stock is in technical uptrend.
Warning
The trend is active but showing early signs of weakness:
- Daily low drops below 21-day EMA
- But close remains above 21-day EMA
Interpretation: Buyers are stepping in at support, but the tight trend structure is being tested.
Action: Tighten stops. Be prepared for breach.
Breached
Exit conditions have been met:
- Two consecutive closes below 21-day EMA
Interpretation: The power trend has failed. Trend is no longer intact.
Action: Exit long positions or significantly reduce exposure.
How to Use This Feature
Screening for Entries
- Filter for Active trends — Stocks that just activated
- Check activation recency — Newly activated trends offer better entry timing
- Verify Condition A streak — Longer streaks indicate stronger trends
- Cross-reference with other indicators — Dark pool flow, relative strength
Position Management
- Initial stop below 21-day EMA (or based on ATR)
- Monitor for Warning signals — Tighten stops when warnings appear
- Exit on Breach — Two consecutive closes below 21-day EMA
- Consider partial exit on Warning signals
Market Breadth Application
The percentage of index components in active power trends indicates market health:
| Power Trend % | Market Condition |
|---|---|
| Above 60% | Strong bull market |
| 40-60% | Healthy market |
| 20-40% | Weakening market |
| Below 20% | Weak/bear market |
Practical Examples
Example 1: New Activation
A stock shows:
- Condition A: 12-day streak (low > EMA21)
- Condition B: 8-day streak (EMA21 > SMA50)
- Condition C: SMA50 rising
- Condition D: Today's close > open
- State: Active
Entry: Consider long position with stop below 21-day EMA.
Example 2: Warning Signal
Previously active stock shows:
- Today's low drops below 21-day EMA
- But close holds above 21-day EMA
- State: Warning
Action: Tighten stop to just below today's low. Reduce position size if desired.
Example 3: Breach Confirmation
Stock in Warning state shows:
- First close below 21-day EMA yesterday
- Second close below 21-day EMA today
- State: Breached
Action: Exit remaining position. Trend structure has failed.
Condition Streak Requirements
The minimum streak requirements can be adjusted based on strategy preference:
| Parameter | Default | Conservative | Aggressive |
|---|---|---|---|
| Condition A streak | 10 days | 15 days | 5 days |
| Condition B streak | 5 days | 7 days | 3 days |
| Condition C lookback | 10 days | 15 days | 5 days |
Conservative settings produce fewer signals with higher quality trends. Aggressive settings produce more signals but include weaker trends.
Technical Implementation
EMA Calculation
The 21-day Exponential Moving Average uses standard EMA formula:
EMA_today = (Close × α) + (EMA_yesterday × (1 - α))
where α = 2 / (21 + 1) = 0.0909
SMA Calculation
The 50-day Simple Moving Average:
SMA(50) = Sum of last 50 closes / 50
Breach Rule
The "2 below" breach rule requires two consecutive closes below the 21-day EMA:
Breach if: Close[today] < EMA21[today] AND Close[yesterday] < EMA21[yesterday]
A single close below does not trigger breach—this filters out one-day shakeouts.
Limitations
- Lagging indicator — Moving averages lag price action
- Not predictive — Identifies current state, not future direction
- Gap risk — Gaps can breach trend without warning
- Market regime dependent — Fewer power trends in bear markets
- Whipsaws possible — Sideways markets can trigger false activations
Combining with Other Strategies
Webster Power Trend works well with:
- Episodic Pivots — EP gap-ups in active power trends are higher quality
- Sector Rotation — Focus on sectors with high power trend concentration
- Relative Strength — Power trends combined with RS leadership are strongest
Related Concepts
- EMA (Exponential Moving Average)
- SMA (Simple Moving Average)
- Trend Following
- Moving Average Crossover
Subscription Access
| Tier | Access Level |
|---|---|
| Free | — |
| Pro | Full access |
| Enterprise | Full access |