What Is Momentum Scanning?
Momentum scanning is the process of systematically evaluating every stock in a universe against a defined set of technical signals to identify which stocks have the strongest directional momentum at a given point in time.
Rather than relying on news, analyst opinions, or gut feel, a momentum scanner applies the same objective rules to every stock in the universe — every day — and ranks them by their combined signal strength.
For S&P 500 options traders, this matters because the strongest momentum stocks produce the most reliable directional options setups. A stock that scores highly across EMA trend, RSI momentum, Relative Strength vs the index, and Volume Surge is a stock that has broad-based institutional participation behind it — not just a random intraday move.
The Four Signals: EMA Crossover
The EMA Crossover signal is the primary trend direction indicator. Stoptions.ai uses EMA-20 and EMA-50 on daily bars.
Bull condition: Price is above EMA-20, and EMA-20 is above EMA-50. This is full bullish alignment — price is trading above both moving averages in ascending order.
Scoring: Full alignment earns the maximum 25 points. Partial alignment (price above EMA-20 but EMA-20 below EMA-50, or vice versa) earns partial points proportional to the alignment strength.
Why this matters: A stock trading above both EMAs in proper sequence has demonstrated sustained buying pressure over multiple timeframes. This is the "trend is your friend" principle encoded into a quantifiable score.
The Four Signals: RSI Momentum Zone
The RSI (Relative Strength Index, 14-period Wilder) signal measures the stock's internal momentum.
Optimal zone: RSI between 55 and 70. This range indicates strong upward momentum without being overbought. The stock has enough fuel left to continue moving higher.
Scoring: RSI in the 55–65 range earns the highest points (25). RSI above 70 earns reduced points — overbought conditions increase reversal risk. RSI below 50 earns zero — momentum is neutral or bearish.
Why not buy overbought stocks? When RSI is above 70, the stock has already made a significant move. The risk/reward for entering here is less favorable, and a pullback before continuation is common. The scanner looks for stocks with momentum but still room to run.
The Four Signals: Relative Strength vs SPY
Relative Strength (RS) measures how the stock is performing versus the S&P 500 ETF (SPY) over the past 20 trading days.
Formula: RS% = (Stock 20-day return) − (SPY 20-day return).
Scoring: A stock outperforming SPY by a meaningful margin earns up to 25 points. Underperformers score near zero.
Why this matters: A stock in a bull market that is underperforming the index is showing relative weakness — institutional money is rotating away from it. A stock outperforming SPY is attracting capital. For options trades, you want the stocks that are leading the market, not following it. They tend to continue outperforming and produce stronger directional moves.
The Four Signals: Volume Surge Ratio
The Volume Surge signal detects unusual institutional accumulation. It compares today's trading volume to the 20-day average volume.
Bull condition: Volume exceeds 1.5× the 20-day average.
Scoring: Volume at 1.5× average earns 15 points. Volume at 2× or above earns the full 25 points.
Why this matters: Price moves on high volume are more significant than price moves on low volume. When a stock breaks out with volume 2× its average, institutions are buying aggressively — not just retail traders. This kind of participation tends to sustain momentum and produce follow-through in the following days.
The Composite Score and the 65-Point Threshold
Each of the four signals is scored independently and summed to produce the Composite Score (0–100). Only stocks scoring 65 or above advance to the options chain analysis stage.
This threshold filters out marginal setups. A stock scoring 64 might have three strong signals but a weak fourth — this ambiguity is exactly what you want to avoid in a momentum options trade.
Stocks clearing 65 are then ranked by composite score and the top 10 advance to options chain fetching. Full Greeks, IVR, win probability, strike selection, stop/target levels, and position sizing are calculated for each.
The final output — your Morning Brief — contains only the setups that have passed every filter. No borderline picks. No gut-feel inclusions.
Frequently Asked Questions
What is an EMA crossover signal in trading?
An EMA (Exponential Moving Average) crossover signal occurs when a shorter-period EMA crosses above a longer-period EMA, indicating that recent price momentum is accelerating upward. The most common configuration for daily momentum scanning is the EMA-20 crossing above EMA-50. Stoptions.ai scores this signal as part of its four-factor composite scoring system.
What RSI level is best for buying call options?
RSI between 55 and 70 is the ideal zone for buying call options on momentum stocks. This range indicates strong upward momentum without being overbought. RSI above 70 signals potential overbought conditions and a higher risk of a short-term pullback. Stoptions.ai specifically targets the 55–70 RSI zone in its screening criteria.
How many S&P 500 stocks typically qualify in a momentum scan?
On a typical trading day, between 20 and 50 S&P 500 stocks score above the 65-point threshold in the Stoptions.ai momentum model. From those, the top 10 by composite score advance to full options chain analysis. The number varies with market conditions — bull markets with strong breadth produce more qualifiers; bear regimes produce fewer.
What is relative strength vs SPY in stock scanning?
Relative Strength vs SPY measures how a stock has performed compared to the S&P 500 ETF (SPY) over a rolling period (typically 20 days). A positive RS% means the stock has outperformed the index — it is attracting more institutional capital than the broad market. Momentum scanners like Stoptions.ai target stocks with positive RS because they tend to continue outperforming.