Tuesday, January 30, 2007

New Filter - Blow Off Bottom

You know that I write often about the blow-off bottom, well I've been working on a filter designed to find these the day they happen so that we can take advantage of the next several days of returns. It's not as easy as it looks but interestingly enough I've managed to get one that works well on "cheap" stocks.

show stocks where close is between 1 and 5
and average volume(90) > 500000
and close 2 days ago < open 2 days ago
and close 1 day ago < open 1 day ago
and volume 1 day ago > volume 2 days ago
and close > open
and low 1 day ago < low 2 days ago

As you can see it concentrates on stocks selling between 1 and 5 dollars with fairly good daily volume (long-time readers of this BLog know that I am partial to the high volume stocks regardless of their price). It tested well over three overlapping periods ranging from August 1st to January 29th (that would be yesterday) with the highest returns happening in the most recent test period. I won't give you the equity figures because those require you to buy 25000 dollars worth of 1.30 stock and you aren't going to do that. The ROI however was in the 160's for each period so I would say that that would be a good data point. ROI is based on end price minus start price regardless of numbers of shares bought.

The other data point that is significant is the win rate and that, for the filter in its current form, is between 50 and 57% or below where I like them to be.

OK that's the good and the bad and the bad isn't that bad - so without further ado - here are the top 3 selections of the filter for today.

DRL
FORG
XOMA

None of them are coming up with earnings this week. FORG actually made money last quarter and XOMA is a biocrapper with some kind of ties to Schering Plough.

At the open today I plan to take some DRL because it is the most volatile of the three and at the top of the list for volume. Nothing much - maybe a grand - something to play with for a couple of days. My stop for DRL will be 32 cents which is 2 times ATR and my profit target is also 32 cents.

2 comments:

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