Methodology

How we tier broken stocks.

Broken Stocks is a rules-based warning system. The criteria are public, the data refreshes daily, and the tiering reflects price action — not opinions about the underlying companies.

What goes on the list

A stock joins the list when it crosses any of three thresholds:

1. Decline depth — currently trading 20% or more below its rolling 252-day high.
2. Time-frame continuity (TFC) — the latest bar is bearish (2-Down or red 3) on 3 or more of {daily, weekly, monthly, quarterly, yearly}.
3. Decline sigma — the most recent drop (over a 5, 10, or 20-bar window) measures 4σ or more relative to the stock's own typical daily volatility.

Any of those triggers inclusion. The tier (Red / Amber / Watch) is determined by the most severe axis — the worst single reading wins.

The universe is common equities on 41 markets — 15,628 tickers, 5,016 U.S. and 10,612 elsewhere, across every major sector. ETFs, closed-end funds and OTC names are excluded — a basket is not a company; ADRs are kept only where the company's home listing is not covered. Non-U.S. lines carry a market-cap and volume floor, so the tail of every exchange is out. Filter the list to U.S. or non-U.S., or read it whole.

The three axes

1. Decline depth

The most legible axis: how far has the stock fallen from its rolling-252-day high? This is the "drawdown" reading that most investors think about. It's a slow signal — a stock that's been broken for months still triggers here, even if today's bar is quiet.

A 30% decline that took two years to develop is structurally different from a 30% decline that compounded in four months. The Red List recency clause (≥30% within 120 days) catches the latter.

2. Time-frame continuity

From The Strat (Rob Smith). A stock's price action exists on multiple time frames simultaneously: daily, weekly, monthly, quarterly, yearly. When all those time frames are moving in the same direction, the trend has continuity and is more durable. When the latest bar on each is a 2-Down or red 3, the trend has continuity to the downside.

A ticker can pass the TFC axis with a tiny percentage decline — what matters is that every relevant time frame is broken. The classic example: a large, slow-moving stock that drops a few percent but does it across daily, weekly, AND monthly time frames. The drawdown is small; the structural break is real.

3. Decline sigma

Sigma scales a decline by the stock's own typical day-to-day volatility. The calculation is:

decline_sigma = (recent high − latest low) / recent high ÷ daily_std

where daily_std is the standard deviation of daily returns over the trailing 20 bars. We compute this across lookback windows of 5, 10, and 20 bars, and take the worst (highest sigma).

Why this matters: a 7% drop in McDonald's (typical daily move ~1.3%) is a 5-6σ event — the same magnitude move as a 30%+ crash in a typically-volatile name. Pure-percent thresholds miss it; sigma catches it.

Tier thresholds

A ticker lands on the most severe tier any axis qualifies it for:

Each ticker's detail page surfaces all three axes, with the triggering axis flagged. The "Trigger" column on the list page shows which axis qualified the ticker.

Tier changes carry a buffer

Quick to warn, slow to give the all-clear. A stock moves up to a more severe tier, or joins the list, the night a rule fires. It moves down a tier, or leaves the list, only after five consecutive scans in which it no longer meets its current tier's rules with a cushion of 3 percentage points on decline depth and 1σ on decline sigma. A name sitting on the 30% line no longer bounces between Red and Watch on a 1% move. The trigger reads "Held" while the buffer is doing the work, and the unbuffered reading is recorded beside it every scan. In force since the 2026-09-18 scan; earlier observations were unbuffered.

Recovering

A ticker on Broken Stocks earns the Recovering badge when our proprietary engine flags a confirmed bullish structural signal — a moderate or strong time-frame-continuity alignment — alongside the existing decline.

The Recovering badge coexists with the tier. A ticker can be Red List · Recovering simultaneously: the structural decline is still severe, and a bullish setup has formed inside it. The two readings answer different questions — the tier tells you how deep the damage is, the Recovering badge tells you whether momentum may be turning.

Recovering is not a buy recommendation; it's an acknowledgement that structural conditions have shifted. The badge stays lit for five scans after the signal last fired, the same buffer the tiers carry.

What we do NOT do

• We do not issue buy or sell recommendations.
• We do not analyze company fundamentals, management, or business quality.
• We do not set price targets.
• We do not rebalance, time, or model portfolios.
• We do not publish opinions about why a stock declined.

The list reflects what price action has done. The interpretation is yours.

Refresh cadence

The underlying scan runs each night against live market data. The most recent scan date is shown on every page of this site (footer, list page header). Listings can join or leave the list any night based on the new data.

What the news said

Some U.S. ticker pages carry a short note on the news around a stock's three largest one-day drops since its high. Code picks those days from price data. A language model then reads the headlines published within a day of each and sorts them into one of ten categories, such as an earnings miss, a share sale, or legal action. The note appears only when the model is confident and names a category, and it is re-checked each night; otherwise the page shows nothing. In a 100-stock check, the model agreed with two separate reference readings of the same headlines on 86 of 99 stocks, and on all 46 where it was confident. It reads headlines, not the company, so it can be wrong, and it never affects a tier.

Limitations

• Technical only. A company with great fundamentals can still be on the Red List if its price has fallen far enough.
• Coverage is not uniform. The U.S. is covered to the bottom of the exchange; other markets carry a size and volume floor, so a small foreign name can be broken and absent. No ETFs, closed-end funds or OTC.
• Non-U.S. history is shorter. Those lines joined on 2026-09-09, so the track record — which holds one basis, U.S. common stocks — does not yet describe them.
• No intraday updates. The list reflects the most recent close, not real-time prices.
• No survivorship adjustment. If a ticker is delisted between scans, it falls off the list silently.

Not financial advice

Broken Stocks is published for educational and informational purposes. Nothing on this site constitutes investment advice, a recommendation, or a solicitation to buy or sell any security. The list is technical and rules-based — it reflects price action, not company quality. Always do your own research and consult a licensed advisor before making investment decisions.