Top-Down Technical Opportunity Scan
Start with market direction, then scan constituents for actionable setups
- Difficulty
- Moderate
- Time to result
- ~weeks to results
- Steps
- 6
- Confidence
- 95%
The method begins with major equity indices and then moves through sectors, related asset classes, and individual securities. Its mechanism is contextual filtering: broad trends establish the environment in which individual opportunities should be judged, while constituent-level reviews test whether the headline indices accurately represent underlying participation. A favorable market and sector backdrop raises the probability that a stock-level uptrend or breakout will persist. Conversely, widespread breakdowns or deteriorating constituent momentum can challenge an apparently healthy index. The process combines trend following with a deliberate search for inflection points, allowing the analyst to maintain core exposure in durable trends while identifying emerging risks, breakouts, breakdowns, and thematic opportunities.
Origin
Extracted from Masters in Business, where Katie Stockton described the institutional technical-research process she uses at BTIG.
Core principles
- 01Establish the broad market trend before selecting securities
- 02Treat macro-sensitive asset classes as context for equity decisions
- 03Use constituent-level reviews to validate the index-level view
- 04Favor long exposure in securities with established long-term uptrends
- 05Look for both continuation opportunities and signs of trend exhaustion
How to run it
- 1
Map the broad market
Review the major equity indices to identify long-term direction, momentum, and important support or resistance levels.
Pro tip Begin with the indices most relevant to the portfolio rather than every available market.
Watch out Do not infer the condition of individual stocks from one index alone.
- 2
Inspect sectors and external drivers
Review sector benchmarks and equity-sensitive markets such as commodities and currencies. Identify which forces support or conflict with the index trend.
Pro tip Prioritize asset classes with a demonstrated relationship to the portfolio.
Watch out Avoid turning the exercise into an unsupported macroeconomic forecast.
- 3
Classify the trend environment
Decide whether the market is trending, range-bound, or undergoing a potential inflection. This classification determines which signals deserve the most weight.
Pro tip Use objective momentum and support-resistance evidence to reduce subjective judgment.
Watch out A recent move does not necessarily establish a durable trend.
- 4
Scan constituents
Review a defined universe of individual securities one by one, looking for uptrends, breakouts, breakdowns, and recurring themes.
Pro tip Use software filters to narrow the universe, but visually verify the resulting charts.
Watch out Automated pattern recognition can surface false or context-free setups.
- 5
Reconcile both views
Compare the constituent evidence with the market and sector conclusions. Increase confidence when top-down and bottom-up signals agree, and investigate meaningful divergences.
Pro tip Treat broad participation as stronger confirmation than a move driven by a few large constituents.
Watch out Do not force individual findings to fit a pre-existing market opinion.
- 6
Define the action and risk
Select setups with favorable trend alignment, then use support and resistance to specify entries, exits, and invalidation levels.
Pro tip Retain flexibility to change the view when the price evidence changes.
Watch out A compelling theme does not eliminate the need for an exit discipline.
In the wild
An analyst first confirms that the broad equity index is in a long-term uptrend, then observes improving relative strength in an industrial sector. A constituent scan reveals several stocks breaking above resistance rather than a single isolated mover. The analyst selects the strongest setup and places the invalidation level beneath established support.
→ The position is supported by market, sector, and stock-level evidence with a predefined risk level.
A capitalization-weighted index reaches a new high, but a scan of its constituents reveals numerous breakdowns and fewer stocks above their key moving averages. Instead of treating the index high as sufficient confirmation, the analyst reduces confidence and monitors for broader deterioration.
→ The portfolio avoids adding exposure based solely on a narrow headline advance.
Common mistakes
Starting with a favorite stock
Analyzing a security without first understanding its market and sector context can leave the position exposed to stronger top-down forces.
Trusting the index without scanning beneath it
An index can conceal weak breadth or concentration, so constituent evidence should confirm the broad view.
Treating the view as permanent
The process is designed to respond to changing price evidence, not defend a fixed prediction.
Is it for you?
Best for
It is best for investors and analysts selecting equities within macro-driven or highly correlated markets.
Not ideal for
It is not ideal for purely fundamental investors who intentionally disregard price trends and entry timing.
From the transcript
“I do start with the major indussease, the equity indsease. I look at sector benchmarks, things like that, and then of course anything that really…”
“And then I do also look at the market, um, you know, just based on the stocks that comprise the major indicry. So every week,…”
“So we're just looking for developments on the charts and themes.”
From the episode
Katie Stockton Started with Technicals in College
Katie Stockton