How does MadStocks decide what goes on the Top Picks list?

Why a four-stage approach?

Most screeners apply a flat list of criteria simultaneously. The problem is that a stock can pass on momentum but be completely illiquid, or look strong technically but have massive put buying before earnings. MadStocks uses sequential gating: each stage eliminates disqualified stocks before the next stage runs.

This means Stage 4 only ever sees stocks that have already cleared Stages 1–3. Each gate solves a different problem:

Stage 1 — Alpha Rank and trend foundation

This is the broadest gate and eliminates the most stocks. A company must satisfy all of these simultaneously:

• Alpha Rank is BUY or STRONG BUY — the MadStocks CANSLIM-based proprietary rating. Only the top tier qualifies. HOLD, SELL, and STRONG SELL are out immediately.
• Price is above the 50-day moving average — the stock must be in near-term uptrend structure. Below the 50-day means sellers are in control of the recent price action.
• 200-day moving average is sloping upward — long-term trend is confirmed bullish. Stocks in primary downtrends are excluded even if they bounce short-term.
• Trading volume is elevated — the 20-day volume ratio must be above average. Stocks moving on below-average volume are likely to reverse on any selling pressure.
• Market cap above $10 billion — MadStocks filters to large-caps only. Smaller companies lack the data history and institutional participation that make patterns reliable.
• IBD RS Rank ≥ 70 — the Relative Strength Rank measures price momentum against all other stocks. A rank of 70 or higher means this stock is outperforming at least 70% of the market over the past year — a prerequisite for being worth trading, not just holding.

Stage 2 — Technical momentum confirmation

Stage 1 confirms the trend. Stage 2 confirms that the trend has institutional money behind it and has not quietly broken down. Three checks run here:

• Chaikin Money Flow (CMF) is positive and rising — CMF above +0.1 indicates money is flowing into the stock, not out of it. The requirement that CMF is also higher than the prior period confirms that accumulation is accelerating, not just present.
• Bullish Break of Structure (BOS) is recent — BOS identifies the most recent point where price broke above a prior swing high on volume, establishing a new higher-high structure. The signal must still be active (within 20 bars) and must have scored ≥ 60% on conviction. A BOS that is too old means the breakout already ran and the best entry has passed.
• Technical rating is not a warning — the composite technical rating for the stock must not be flagged as Caution or Avoid. These flags appear when multiple indicators are simultaneously deteriorating, even if price has not yet reflected the weakness.

Think of Stage 2 as asking: is the money still flowing in, and is the structure still intact? A stock can have a great Alpha Rank and still be in a silent distribution phase — Stage 2 catches that.

Stage 3 — Liquidity gates

A setup with no liquidity is a trap. Stage 3 has two parallel requirements — both must pass:

This gate exists because options-based signals are unreliable on illiquid names. If the options OI is too thin, a single large hedging trade can skew the put/call ratio in Stage 4. MadStocks requires real options participation before running the Stage 4 check.

Stage 4 — Options sentiment

The final gate reads the options market to assess whether institutional participants are positioning bullishly or defensively heading into the near term. Two checks run:

• Put/call OI ratio < 1.0 (near-term) — when open interest in calls exceeds open interest in puts for options expiring within the next 7–60 days, institutions are positioned for a move up or are not hedging against one. A ratio above 1.0 signals more downside protection than upside speculation — that stock is dropped.
• Net GEX ≥ 0 (positive gamma) — GEX (Gamma Exposure) measures how options market makers are positioned. A positive net GEX means market makers are net long gamma, which creates a natural price-stabilizing effect: they buy dips and sell rips around key strikes. This reduces the probability of wild gaps against your position. A negative GEX environment is a volatility-amplifying condition — not the right backdrop for a directional setup.

How final ranking works

Stocks that pass all four stages are not ranked arbitrarily. Two factors determine their order on the list:

1. Composite score (primary sort) — a weighted blend of Alpha Rank score, technical rating, momentum, and GEX conviction. Higher composite = more dimensions confirming the same bullish story.
2. IBD RS Rank (tiebreaker) — when composite scores are similar, the stock with stronger relative price performance against the market is ranked higher. Price leadership is a durable signal.

The final list is trimmed to the top N results. This is intentional: you do not need 40 ideas. You need 5–10 stocks where everything lines up.

Reading the Top Picks results table

How to use Top Picks in your daily workflow

1. Check the list each morning before market open — Top Picks refreshes daily. A stock on the list today may not be on it tomorrow if any condition deteriorates.
2. Sort by Composite score — the top two or three stocks on the list are where all five dimensions are most tightly aligned. Start your research there.
3. Open the Technical deep dive — click the Technical link in the Action column. Confirm the chart structure visually. Top Picks tells you the conditions are met; the chart tells you where to enter.
4. Check the Options depth — use the Options link to see recent call/put flow, open interest, and IV. You already know the put/call ratio is favorable — now check if there is unusual call buying that confirms the move.
5. Verify GEX — the GEX link shows you the gamma exposure by strike. Look for your target price to be in a region of positive GEX — that is where market makers will help stabilize the price.
6. Size appropriately — Top Picks improves probability by ensuring all signals align. It does not remove risk. No screener can do that. Use it to focus your attention, not to bet the house.

Top Picks is a starting point, not a finished trade. The four-stage method ensures every stock on the list has passed a meaningful bar. What it cannot do is predict what the market will do tomorrow. Use the list to narrow your focus, then do your own chart analysis before committing capital.