How to Scan the ASX for Leading Stocks Using Proven US Methods
- Anita Arnold
- Sep 15
- 5 min read
Updated: Sep 19
Combining World-Class Scanning Methods for Australian Markets
Finding the strongest momentum stocks on the ASX becomes significantly easier when you apply proven scanning methodologies from two of the world's most successful traders. By combining William O'Neil's Relative Strength Index with Mark Minervini's Volatility Contraction Pattern filters, Australian traders can identify emerging leaders before they make their major moves.
The challenge for ASX traders has always been accessing these sophisticated scanning tools, which were originally developed for US markets. Unlike American investors who have ready access to RS Index data through Investor's Business Daily, Australian traders must adapt these methodologies to local market conditions and available data sources.
This educational analysis demonstrates how these world-class filtering systems can be successfully applied to the All Ordinaries Index, revealing a systematic approach to identifying Australia's next momentum leaders.
Understanding the Relative Strength Index for ASX Stocks
The Relative Strength Index, developed by William O'Neil, measures how a stock's price performance compares to the broader market over specific time periods. This differs from the more commonly known RSI oscillator, focusing instead on comparative price strength rather than overbought/oversold conditions.
For ASX applications, the RS Index reveals which stocks are outperforming the All Ordinaries Index, providing early signals of emerging sector strength or individual company momentum. Recent analysis of ASX leaders shows RS Index scores ranging from 86 to over 99, indicating exceptional relative performance.
Top ASX Performers by RS Index
The systematic application of RS Index scanning to ASX stocks recently identified several standout performers:
Paladin Energy (PDN.ASX) topped the rankings with an exceptional RS Index score of 99.17, delivering 59% monthly performance. This uranium explorer's breakout pattern demonstrated the power of combining fundamental sector strength with technical momentum signals.
Cettire (CTT.ASX) achieved second place with an RS Index of 95.09 and monthly gains of 37.7%. The online luxury retailer's chart pattern exhibited a textbook Volatility Contraction Pattern before its explosive move higher.
Novonix (NVX.ASX) secured third position with an RS Index of 94.74, generating remarkable quarterly returns of 97%. This battery technology company's sustained momentum reflects the broader lithium and battery sector strength that has characterised recent ASX performance.
Volatility Contraction Pattern Analysis for Australian Stocks
Mark Minervini's Volatility Contraction Pattern methodology adds a crucial technical overlay to fundamental and relative strength analysis. The VCP identifies stocks entering low-volatility consolidation phases before significant breakouts, often preceding the strongest momentum moves.
Key VCP Characteristics on ASX Charts
Australian stocks displaying VCP patterns typically show three to four consolidation phases, each exhibiting:
Decreasing volatility with each successive pullback
Shallow corrections that don't violate key moving averages
Constructive volume patterns during the consolidation phase
Above-average volume on the eventual breakout
VCP Success Stories from Recent ASX Analysis
Cettire's Classic VCP Formation
CTT.ASX demonstrated a textbook VCP pattern prior to its 37% monthly surge. The stock showed multiple consolidation phases with decreasing volatility, each pullback becoming shallower than the previous. The pattern culminated in a volume-supported breakout above the 50-day moving average, triggering the sustained upward momentum.
Novonix's Extended VCP Development
NVX.ASX exhibited a more complex VCP formation spanning several months. The pattern included a significant initial decline followed by progressively tighter consolidations. The eventual breakout coincided with broader lithium sector strength, demonstrating how VCP patterns can align with thematic momentum.
Combining Fundamental Filters with Technical Patterns
The most powerful approach combines Mark Minervini's fundamental screening criteria with the technical pattern recognition and relative strength analysis. This three-pronged methodology significantly improves the probability of identifying sustainable momentum moves rather than short-term volatility spikes.
Fundamental Criteria for ASX Applications
When applying Minervini's fundamental filters to ASX stocks, key considerations include:
Revenue Growth Consistency: Companies showing accelerating quarterly revenue growth over multiple periods Profit Margin Expansion: Businesses demonstrating improving operational efficiency Institutional Participation: Evidence of professional money management interest Sector Leadership Position: Companies leading their respective industry segments
Integration with RS Index Rankings
The systematic combination of these methodologies recently identified four ASX stocks meeting both technical and fundamental criteria:
Novonix (NVX.ASX) - Leading battery technology with strong institutional backing
Aussie Broadband (ABB.ASX) - Telecommunications growth story with expanding market share
Clinuvel Pharmaceuticals (CUV.ASX) - Pharmaceutical innovation with regulatory approvals
Envirosuite (EVS.ASX) - Environmental technology with growing contract base
Practical Application for Australian Traders
Scanning Methodology
The systematic approach involves three distinct phases:
Phase 1: Initial RS Index Screening Filter the All Ordinaries Index for stocks with RS Index scores above 80, indicating top-quartile relative performance compared to the broader market.
Phase 2: VCP Pattern Recognition Review qualifying stocks for consolidation patterns showing decreasing volatility and constructive chart development over 8-15 week periods.
Phase 3: Fundamental Validation Apply growth criteria to ensure underlying business strength supports the technical momentum signals.
Risk Management Considerations
Australian market conditions require specific risk management adaptations due to lower liquidity and higher volatility compared to US markets. Position sizing becomes crucial, particularly with smaller capitalisation stocks that often exhibit the strongest momentum characteristics.
The educational framework emphasises that successful momentum trading requires systematic adherence to predefined criteria rather than emotional decision-making during volatile market periods. Historical analysis shows that the strongest ASX momentum moves often occur in stocks initially dismissed by traditional value-oriented approaches.
Market Cycle Awareness for ASX Momentum Trading
Understanding broader market cycles enhances the effectiveness of these scanning methodologies. Australian markets often lag US developments by several months, providing opportunities for prepared traders to anticipate sector rotation patterns.
Recent market analysis suggests that small-cap miners and technology companies continue showing superior momentum characteristics compared to traditional large-cap ASX components. This aligns with historical patterns where emerging themes drive the strongest relative performance.
Sector Rotation Implications
The current market environment favours companies benefiting from global decarbonisation trends, including uranium, lithium, and renewable energy infrastructure. These thematic tailwinds provide fundamental support for technical momentum patterns in related ASX stocks. Master Advanced Scanning Techniques Through Structured Education
Understanding VCP patterns and RS Index methodology provides the foundation for systematic stock analysis, but developing proficiency requires ongoing market education and practical application study. FMP YouTube members deepen their analytical skills through weekly demonstrations of scanning methodology applied to current ASX conditions, detailed pattern recognition training, and educational community discussions with experienced momentum trading practitioners. Members receive early access to educational materials covering emerging formations and systematic filtering techniques. Continue developing your momentum scanning education through our comprehensive learning framework designed to build systematic pattern recognition skills.
Key Takeaways for ASX Momentum Scanning
The systematic application of proven US scanning methodologies to Australian markets provides a structured approach to identifying emerging momentum leaders. The combination of William O'Neil's Relative Strength Index with Mark Minervini's Volatility Contraction Pattern analysis offers a comprehensive framework for stock selection.
Remember that these methodologies identify potential opportunities for educational analysis rather than specific investment recommendations. The strongest momentum moves often occur in stocks showing both technical pattern development and fundamental business improvement.
Australian traders benefit from adapting these world-class techniques to local market conditions, creating a systematic edge in identifying the next generation of ASX momentum leaders. The key lies in maintaining disciplined adherence to predefined criteria while remaining flexible enough to adapt to evolving market conditions.
For those interested in developing their momentum trading education, focus on understanding the psychology behind these patterns rather than simply memorising the technical criteria. The most successful applications combine systematic pattern recognition with deep understanding of market participant behaviour during different volatility regimes.
Disclaimer: Finer Market Points Pty Ltd, CAR 1304002, AFSL 526688, ABN 87 645 284 680. This general information is educational only and not financial advice, recommendation, forecast or solicitation. Consider your objectives, financial situation and needs before acting. Seek appropriate professional advice. We accept no liability for any loss or damages arising from use.