StockCharts Technical Rate (SCTR): Meaning, Example, Limitations

What is the StockCharts Technical Rank (SCTR)?

The StockCharts Technical Rank is a numerical ranking for individual stocks in different groups—large-cap (cap), mid-cap, small-cap, US non-leveraged funds and non-inverse exchange-traded funds (ETFs), and Canadian stocks—that shows the stock’s overall strength based on six technical indicators covering different time frames. The ranking method is called SCTR (pronounced “scooter”) for short.

The SCTR was created by John Murphy, a technical analyst and author, and is available on Stockcharts.com.

Understanding the StockCharts Technical Range (SCTR)

Investors select the group they want to analyze, which provides a list of stocks within that group ranked from zero to 99.99. A score of 99.99 means that the stock is performing extremely well compared to its peers based on the six technical criteria.

Zero is the worst score, indicating that the stock is severely underperforming its peers in the group from a technical point of view.

Some traders may want to buy strong stocks, or stocks with an increasing SCTR ranking, while selling or shorting stocks that have a weak or deteriorating SCTR ranking. It is based on buying or selling relative strength or weakness.

A rising SCTR shows the stock is gaining momentum against its peers. This means it can currently increase in value, or hold better or not as much as its peers decline. A falling SCTR shows the stock is losing momentum against its peers. The price may fall, or the price may simply lag the price performance of its peers.

All the indicators in the ranking system are based on price. In this way, the SCTR reveals how the price performance of any given stock compares to others.

The SCTR formula covers different time frames, and a stock must perform well on all of them to get a high score. The most weight is given to the long-term indicators, since the long-term trend is a more dominant force than short-term fluctuations.

It is created using the following formula and weights:

The SCTR compares a stock to its peers, not to a specific benchmark such as the S&P 500 index.

Example of how to use the StockCharts Technical Rank

The SCTR is an extremely versatile tool. This can be used to filter stocks to find those that are very strong. This will help a trader looking for stocks with a lot of current upside momentum.

Alternatively, the SCTR can be used to find stocks that are very weak, may be poised for a reversal, or may present a good value investment opportunity. However, just because a stock has gone down in value doesn’t necessarily mean it’s worth buying.

A blend of both these concepts is to look for stocks that had low SCTR rankings but are improving. This shows that the stock has recently outperformed its peers. Similar to trading chart patterns, traders can look for breakouts in the SCTR, such as a move above a previous swing high or a move from below 30 to above 30 or 50 (or any desired level).

The following daily chart from Leggett & Platt (LEG) shows a number of trades based on different types of breakouts in the SCTR. Some produced good entry signals, while others produced poor entry signals. Green arrows represent buy entries, and red arrows represent short entries.

Note that a rising SCTR does not always indicate a rising share price. This is because a stock’s price may actually fall, but if the stock falls less than its peers, its SCTR will increase.

There are several ways to use the SCTR, and many simply choose to use it as a confirmation tool. For example, if they find a stock they want to buy, they will look to see if the SCTR is increasing. If it is not, it means that the stock is not yet performing as well as its peers, and possibly another stock in the group is stronger and therefore a better buy. Buying before the SCTR starts to increase means that the trader expects the stock to start outperforming, which it may or may not do.

The difference between the StockCharts technical rank and relative strength

The SCTR goes beyond comparing one stock to another or comparing a stock to an index, which does relative strength. The SCTR ranking shows how strong a stock is, based on the technical criteria, against a group of other stocks. Relative strength can show you that one stock is outperforming the S&P 500 index, but the SCTR shows how that outperformance compares to other stocks. This is the ranking feature that makes the SCTR unique.

Limitations of the StockCharts Technical Rank

The SCTR value can change rapidly. A stock that looks strong, say with a 99 SCTR, can reduce its rank to almost zero in a day on a big selloff. Therefore, the SCTR is a lagging ranking method. It shows past performance but does not indicate future performance.

As mentioned, the SCTR can sometimes be deceptive. It’s a ranking system, so a stock can actually go down in price but still have an increasing SCTR. That doesn’t necessarily mean it’s a good buy. The SCTR is best used in conjunction with other forms of analysis, such as price action, technical indicators or chart patterns.

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