The Daily Babe-o

Pania Rose

A "new" Muddy filter

Muddy mentioned back in comments about how white candle around the lower Bollinger Band with a tail as long as the body or bigger can kickstart a rally. I know he talks about white candles under LBB on his blog but I don't think this tail data has ever been coded. Anyway I just did. And the backtest is pretty ridiculous. 

show stocks where close is above open 

and price is between 1 and 20 

and average day range is above 3

and average volume(90) is above 700000

and set{bottail,open-low} 

and set{body,close-open}

and bottail > body

and price touched lower bollinger band(20)

Here are some of the backtest results

** UPDATE

I suppose this is a bullish hammer... however I think the combination of the LBB position makes it more powerful

Watches Monday Dec. 1

WYN ATPG CI DNR MEE DYN FNF URBN AEO

These are all run ups that had a red candle on Friday. They aren't picked up on the Red Floater scan because they are under the upper Bollinger Band but it is the same idea. They are ranked in order of highest probability short on $DJI red. My favorites from everyone elses lists are

YRCW XTEX OCNF TRW SOLR PPC AXL STSI HTZ

A possible logo

for birdbrain Vento

Surprisingly accurate.

Shameless

I've decided to post hot chicks in a shameless attempt to get more readers on my blog...

Jarah Mariano 

Just kidding

(Or am I?)

Anatomy of a day trade

To make the blog more interesting I've decided to post same play-by-plays of actual trades that I make from time to time. The hope is to get more into chart details and analysis of what goes right and wrong during the trade. To start things off I will post my trade of ATPG from today.

Eyeing it up at open

After giving it 5 minutes I decide it's worth a trade

I get in with a market order a few seconds later

Early success!

What to do? Ride through the bump or get out?

This is why I like Ramtajogi's calculator so much. When the Dow surges, the odds of the short go from fantastic to a coin flip.

These aren't just abstract stats. The uptrend in ATPG directly coincides with the Dow moving steadily up at 11:00.


I got out at 6.18. 

It turns out that was a decent exit since this was a true reversal. 

Final profit


So this isn't really a bragging post. The trade was less than ideal since I had multiple chances to take profit below $6 but didn't. I left about $200 on the table. I give my entry an A and my exit a B- so overall trade: B+

This is where trading strategy gets interesting. Is it better to hold multiday or get out early? The answer has more to do with your personality- I like getting in and out of a trade with decent profit to show for my effort and hate to see reversals take it all back. On the other hand the multiday holds that Muddy does usually result in more profit. 

Post any ideas for future things you'd like to see on the blog. It will be impossible to post every trade but I'll try to post some interesting ones.

Watches Friday Nov. 28

RAS PCK HWD HDNG LEN BBX

RAS ended with a spike... the last 2 times it did that it dropped significantly

PCK bad news panic sell, may continue

HWD 90% correlation on $DJI red in November... nobody wants diamonds haha

HDNG same

LEN 3 days up, historically good chance for failure, 80% correlation for Nov

BBX reliable downtrend, can barely string together 2 white candles in a row

may add some more later

** UPDATE 

sorry I haven't added any more- by the way all of Yngvai's picks are great- I didn't put them on my list because I'm trying to find different ones from others- however I do evaluate everyone's watchlists, as per my comment that I shorted HRP off of Yng's list

many more great picks on Muddy's list and stackyourcream... my favorites now are ATPG and IPCS... excellent looking charts and good odds for shorting if the market is down today

Day traders making a comeback in volatile markets

An interesting short read on Slate.com

link

Proof that Timothy Sykes is using SPAMMERS to sell his products

Many who follow the Timothy Sykes drama know that there is an annoying acolyte, one Jeremy K, who is relentlessly spamming people trying to get people to buy Tim's products. Worse still, he uses a 'faux' spam site to lure unsuspecting 'prey' into a site that purports to be about deconstructing Sykes, yet instead leads one through a maze that in the end pressures the 'prey' into in fact signing up for Sykes' 'service'. As annoying as I found all that mess, I never thought much about it. However, after receiving a series of emails, which I describe below, I now come to believe that the 'Jeremy K' SPAM operation is in fact run by Sykes himself. The proof follows.

Here is a screenshot of the original SPAM: keep in mind, I put Jeremy K on my spam filter, so nothing from him should have gotten through:

All of that is one thing. Yet when I responded to this email, minutes later, Pallian responded acting like he didn't know what is going on:

In his defense, Pallian claims to not know what is going on. He implies that the actions of Jeremy K are 'rogue' in behavior. However, if you review the original SPAM, it clearly shows Pallian's email listed as 'Jeremy K'.

Let's keep an eye out for how truthful that is. We already have reason to believe that the Sykes operation has compromised its integrity; it once blasted Beacon Research (saying it 'sold its soul') but later accepted Beacon as a sponsor. Stay tuned.

Yes Pallian. I now have direct proof that you are linked to a SPAM site. If I can determine this is illegal, I will also look into Better Business Bureau practices about using SPAM and lying about it. Do you want to bank on whether or not this will be a problem for you? Then clear it up soon.

** UPDATE

Apparently Timothy Sykes doesn't care that someone is spoofing his email- Pallian at least acted concerned- he pretty much states his position in comments that he doesn't care. More proof that the two are actually connected in a working operation rather that as just an 'affiliate'. This certainly is sketchy behavior- just as sketchy as taking sponsorship money from a company that you once blasted as a SPAMMER- I guess it takes one to know one.

FROM THIS:

TO THIS IN A FEW SHORT MONTHS

Watches Monday Nov. 24

DAC HALO PLD TRMA YRCW HUGH RLF RPF AMCC CPE IPG AMCC STXS

DAC 87/77

HALO 87/40

PLD 85/36

TRMA 85/57

YRCW 85/57

HUGH 85/50

RLF 82/33

RPF 82/40

AMCC 82/43

CPE 80/43

IPG 82/26

AMCC 82/43

STXS 75/33

And my pick of the day is: DAC

Muddy filter 3 day fail - JV modification

I spent this morning analyzing the fail filter. Yes, this is how I spend my Sunday mornings. I believe Muddy said that the original intent of this filter was to look for weak stocks that were ready to pop. In that regard the filter selects for longer bottom tails than top ones as a sign of reversal. For shorts, we want the opposite- shorter bottom tails and less reversal. So I flipped the code to reflect that point.  I only changed 3 words- you can copy the code below. I put this in a separate post so you can use both filters as you see fit. Very nice coding by Murknd.

set{x,count(volume 3 days ago above volume 4 days ago,1)*2} and set{y,count(volume 3 days ago above average volume(90),3)} and set{z,x+y} and z is above 1.1 and close 3 days ago had been decreasing over the last 3 days and average volume(90) 3 days ago is above 100000 and close 3 days ago is between 1 and 10 and low 3 days ago is below lower bollinger band(20) 3 days ago and count(close 3 days ago above open 3 days ago,3) is below 2.1 and day change has been below 0 for the last 3 days and set{a,count(volume above volume 1 day ago,1)} and set{toptail,high-open} and set{bottail,close-low} and set{taildelta,bottail-toptail} and set{b,count(taildelta is below 0,1)} and set{c,a+b} and c is above 0 and set{d,count(volume 1 day ago above volume 2 days ago,1)} and set{toptaila,high 1 day ago-open 1 day ago} and set{bottaila,close 1 day ago-low 1 day ago} and set{taildeltaa,bottaila-toptaila} and set{e,count(taildeltaa is below 0,1)} and set{f,d+e} and f is above 0 and set{g,count(volume 2 days ago above volume 3 days ago,1)} and set{toptailb,high 2 days ago-open 2 days ago} and set{bottailb,close 2 days ago-low 2 days ago} and set{taildeltab,bottailb-toptailb} and set{h,count(taildeltab is below 0,1)} and set{i,g+h} and i is above 0 offset is 0

** UPDATE

2 day and 1 day fail filters with JV modification

2 day fail

set{x,count(volume 2 days ago above volume 3 days ago,1)*2} and set{y,count(volume 2 days ago above average volume(90),3)} and set{z,x+y} and z is above 1.1 and close 2 days ago had been decreasing over the last 3 days and average volume(90) 2 days ago is above 100000 and close 2 days ago is between 1 and 10 and low 2 days ago is below lower bollinger band(20) 2 days ago and count(close 2 days ago above open 2 days ago,3) is below 2.1 and day change has been below 0 for the last 2 days and set{a,count(volume above volume 1 day ago,1)} and set{toptail,high-open} and set{bottail,close-low} and set{taildelta,bottail-toptail} and set{b,count(taildelta is below 0,1)} and set{c,a+b} and c is above 0 and set{d,count(volume 1 day ago above volume 2 days ago,1)} and set{toptaila,high 1 day ago-open 1 day ago} and set{bottaila,close 1 day ago-low 1 day ago} and set{taildeltaa,bottaila-toptaila} and set{e,count(taildeltaa is below 0,1)} and set{f,d+e} and f is above 0

1 day fail

set{x,count(volume 1 day ago above volume 2 days ago,1)*2} and set{y,count(volume 1 day ago above average volume(90),3)} and set{z,x+y} and z is above 1.1 and close 1 day ago had been decreasing over the last 3 days and average volume(90) 1 day ago is above 100000 and close 1 day ago is between 1 and 10 and low 1 day ago is below lower bollinger band(20) 1 day ago and count(close 1 day ago above open 1 day ago,3) is below 2.1 and day change is below 0 and set{a,count(volume above volume 1 day ago,1)} and set{toptail,high-open} and set{bottail,close-low} and set{taildelta,bottail-toptail} and set{b,count(taildelta is below 0,1)} and set{c,a+b} and c is above 0

enjoy.

Muddy filter 3 day fail

Muddy posted this filter in comments, it's worth a blog entry for sure. This and other Muddy filters were routinely discussed on StockFetcher back in 2003-2005... I wish I had been around during that time. I'm still playing catch up. Luckily, Muddy is still around and still giving away his knowledge for free... and I will continue to take it and try to learn from it. My whole blog is dedicated to Muddy and 13th for their worldview of giving away knowledge for free, and of patient teaching and coaching. If you want something to be thankful for this week, let it be that.

Muddy 3 day fail filter

set{x,count(volume 3 days ago above volume 4 days ago,1)*2} and set{y,count(volume 3 days ago above average volume(90),3)} and set{z,x+y} and z is above 1.1 and close 3 days ago had been decreasing over the last 3 days and average volume(90) 3 days ago is above 100000 and close 3 days ago is between 1 and 10 and low 3 days ago is below lower bollinger band(20) 3 days ago and count(close 3 days ago above open 3 days ago,3) is below 2.1 and day change has been below 0 for the last 3 days and set{a,count(volume above volume 1 day ago,1)} and set{toptail,high-open} and set{bottail,close-low} and set{taildelta,bottail-toptail} and set{b,count(taildelta is above 0,1)} and set{c,a+b} and c is above 0 and set{d,count(volume 1 day ago above volume 2 days ago,1)} and set{toptaila,high 1 day ago-open 1 day ago} and set{bottaila,close 1 day ago-low 1 day ago} and set{taildeltaa,bottaila-toptaila} and set{e,count(taildeltaa is above 0,1)} and set{f,d+e} and f is above 0 and set{g,count(volume 2 days ago above volume 3 days ago,1)} and set{toptailb,high 2 days ago-open 2 days ago} and set{bottailb,close 2 days ago-low 2 days ago} and set{taildeltab,bottailb-toptailb} and set{h,count(taildeltab is above 0,1)} and set{i,g+h} and i is above 0 offset is 0

I'm really interested in talking to Muddy about how he analyzes upper and lower tails on candles.... perhaps there is something that can be put into calculator form...  I'll update if I ever come upon such information.

The state of the blogosphere / Watches for Friday Nov 21

The sign of a mature blogosphere is that different blogs each find their own niche so that they all work together to make the collective more informative and interesting. 

In that regard, my niche may involve picking highly likely stocks to short that aren't based on recent strength, like Muddy and Timothy Sykes like to do. That is a great strategy that I like to follow as well, but if we all post the same watchlists then we aren't really working in symbiosis. In these market conditions, I find it somewhat astounding that traders would routinely ignore stocks that are steadily in decline, since that is where the majority of the market is. However, groupthink is easily created and difficult to break, especially when the groupthink involves a legitimately good idea.

Perhaps my ultimate role in the stock blogosphere may be to help devise simple calculators to help traders make more informed decisions about the trades they are making. The goal is to use the available information to the trader's advantage without getting too bogged down in statistical theory and the misguided notions of automated trading, which is part of the reason Avery Horton Jr. is so unpopular in certain trading circles, besides his personality flaws. I believe strongly that there is valuable information buried in the charts that is helpful to traders but is too sophisticated for the brain to analyze quantitatively, whereas once the trader has access to that information explicitly he/she may decide upon another course of action or at least verify the intuitive feelings they have about the trade. Technical indicators are an attempt to provide this information, but they all fall short somehow, leaving the serious trader wanting for a more reliable source for their upcoming decision making. Maybe stats can help in that regard; hopefully the idea of using stats in trading decisions hasn't been tainted by the unpleasant internet presence of "The Rumpled One".

That being said, simply listing the stats for my watchlist is useful but occasionally I should add some analysis as well.

AA EMC XLF LUV AMD C UYD BAC SSO

AA 81/31

EMC 81/26

XLF 81/37

LUV 81/26

AMD 84/53

C 74/47

UYG 71/37

BAC 74/32

SSO 77/16

So far I have discovered that the 80% mark is a meaningful threshold for solid performance as expected on a $DJI red day. Even stats as high as the 70's are not reliable as can be gleaned from an analysis of my previous watch lists. As you can see from the second part of the stat, most of these picks should be abandoned on a strong market rally day. That is the reason these stats were created in the first place. Change your strategy or stick with stocks that have a 'reliable' record of failure in the face of a strong headwind. In this regard, these kinds of stocks should be watched carefully when the overall market reverses intraday. An intraday reversal should be viewed in some ways as a market 'up' day. I will have much more to say about this situation in future posts. Also in the future I will post long watches on market rally days as well. Without running extensive scans I will say that LCC AMR UAUA are poised for a rally on the next strong day.

** UPDATE

I don't know how to say this any plainer folks. When the market flips, use the opposite indicator as your guide for shorts- or even better, use the lower number as your guide for longs, since the opposite action is inferred in the second statistic. Let's go through this again.

AA 81/31

EMC 81/26

XLF 81/37

LUV 81/26

AMD 84/53

C 74/47

UYG 71/37

BAC 74/32

SSO 77/16

AMD and C were the best probability shorts going into a market rally. The numbers reflect that. Let's look at other play options.

The bold number is the probability of shorting success on a $DJI green day- the inferred statistic is the opposite number, namely the probability of success long on a $DJI green day.

Those numbers are:

AA    69

EMC  74

XLF   63

LUV   74

AMD  47

C       53

UYG  63

BAC   68

SSO   84

Based on these numbers alone, I would have gone long on SSO.  AA was a surprise gain and you can never really predict those, but the SSO return was solid based on the stats. 

Watches Thursday Nov. 20

F GM PLD URE AMD HIG HST AMAT XLF AA

I don't even know if it is possible to get shares of F and GM but if ever there was a time it is now. Look at the stats:

F 84/68

GM 87/78

PLD 87/37

URE 87/42

HST 81/21

Most stocks change dramatically whether or not the market is up or down. Look at GM: 87% chance of red on $DJI red, and 78% chance of red on $DJI green. Amazing.

Use this list as a supplement to Muddy's list for short watches based on recent (unsustainable) gains.

** UPDATE

Pretty good so far... AMAT had the lowest stat with "only" a 77% chance of going red... all others were 80%+ ... PLD was the highest with 87% (and my pick of the day for that reason)

Update

Had a good conversation with Ramtajogi last night, the calculators are in the works. I don't think we will set the world on fire but when we finally get to the holy grail, the Scenario Calculator, I think it will be pretty cool. Hope you agree.

ADR support and resistance StockFetcher filter

For anyone who believes in the idea that average day range can be an indicator of intraday support and resistance (an idea I pioneered here), the following is a StockFetcher filter written to calculate these numbers. Not flashy but it saves me from having to use a calculator which I often find myself grabbing. Put in any stock symbols that you want to check; as many as you need separated by commas. This code was written by DaveH in chat; next time you see him tell him you appreciate his work (I do!).

SYMLIST(ABK,RDN,TMA)   /* enter whatever tickers you want to calculate here*/
set{range1ago, high 1 day ago - low 1 day ago}
set{range2ago, high 2 day ago - low 2 day ago}
set{range3ago, high 3 day ago - low 3 day ago}
set{range4ago, high 4 day ago - low 4 day ago}
set{range5ago, high 5 day ago - low 5 day ago}
set{tot12, range1ago + range2ago}
set{tot34, range3ago + range4ago}
set{tot1234, tot12 + tot34}
set{tot_15, tot1234 + range5ago}
set{range_avg15, tot_15 / 5}
add column range_avg15 {5day_avg_range}
set{hi_range, open + range_avg15}

add column open

add column hi_range
set{low_range, open - range_avg15}
add column low_range

Watches Wednesday Nov. 19

GTE BTIM IDMI HZO STXS FRPT MNI SMCI GBX 

The highest probabilities on $DJI red are MNI STXS 

Some short on weakness candidates are SKS IPG ABD

SKS  80/38

IPG  85/25

ABD  82/42

Watches Monday Nov. 17

FUQI ONNN LIZ VECO PERY FONR BEE TLB OVEN CRBC

FUQI 61/32

ONNN 80/35

LIZ 66/30

VECO 90/40

PERY 74/38

FONR 50/45

BEE 72/26

TLB 75/45

OVEN 80/32

CRBC 66/35

The reason I sometimes post continual droppers is they have extremely high probabilities of going down on market red days based on the co-relation calculator (explained here). 90% probability for VECO on $DJI red is about the highest probability you are ever going to find (100 day period used here). 

Don't read too much into the fact that several of these involve women's fashion/make up.

** UPDATE


Looks like the stats held up pretty well. The weakest ones, FUQI and FONR went green while the strongest ones, ONNN, VECO, and OVEN performed as expected.

Late day spikes

This post is really an addendum to the one on what I look for in shorting candidates. Who knows why these late day spikes are so coordinated; just keep taking advantage of them while they happen. As per my short short watch list, here are NCT UMC RAS

This is what happened the last time NCT and RAS spiked:

History repeats itself tomorrow.

Watches Friday Nov. 14

NCT RAS UMC CHIC PHH ANV TIV GSOL

NCT 74/27

RAS 85/36

UMC 76/30

ANV 66/42

TIV 77/40

CHIC 60/40

PHH 75/30

GSOL 85/27

All bets are off it the market surges again tomorrow.

** UPDATE

I hope people are making money from these calls- am I making them all in vain?

What I look for in shorting candidates

Yngvai asked in the comments what patterns I'm looking for in my watchlists. I thought I would post it here.

1. long red candles - this sounds obvious, but it's not the same as high day range exactly. Some stocks have longer red candles than white, which skews their ADR down. I don't know if it's useful to calculate ADR separately for red and white candles, but it is something that I am investigating. (Perhaps another calculator? I already have calculator back log.) If you want to see an example of a chart where the red candles are consistently longer than the white, look at PHH:

2. short top shadows on the red candles - this is something that I am actually working on in calculator form. In short, the lower the top shadow on a red candle, the better probability the short will be on red (since you wouldn't short when the stock is green... I don't consider premarket leader drops in these situations- that is actually another category but one that this calculator will be able to analyze)

3. high probability on the co-relation calculator - this one is self explanatory. If the percentage is very low when the Dow is green, then I won't go into it on those days. Only stocks with good numbers (> 50% are considered when the market is soaring). 

4. place on the chart - if you only screen for stocks that are up 8% on the day/15% in 2 days you can miss many good plays that have dropped but still have more down.  FRPT is a good example of that today from my watchlist. 

5. the propensity of a stock for multiday run ups/downs - this is something that you can get from just reading the charts but I want to make a calculator for it to make my life easier and give me more hard numbers to make an evaluation. If a chart is one day up you have to make a call whether it has the ability to keep going. If you wait only for multiday run ups (like I once concluded) you will miss good opportunities like NCT (that was as beaut). Again, it depends on the stock.

**UPDATE

more here.

Watches Wednesday Nov. 12

HQS FRPT STEM HOTT BXG CPHL RDN NNBR CTCM XTEX

I'm still working on getting new calculators developed... I'm at the mercy of my generous programmers donating their time... it will be worth it for everyone in the end, so I know they'll come through. 

stats for shorting on market red/green days (expressed as percentage over past 2 month period)

XTEX 85/85

HQS 70/40

NNBR 80/60

STEM 55/55

HOTT 70/30

CTCM 80/35

BXG 80/45

FRPT 73/50

RDN 63/45

this concept of market conditions affecting shorts (or longs) is explained here.

**UPDATE

Watches Friday Nov. 7

DIN NAK VIP  don't forget out those that are down but still way overextended

SNTS PNCL  red floaters

BLT  7 days up

AEL NGA easy borrows, in play

SNMX  1 day up but reliable loser

and bounce watch:

ABK (how low can you go... 52 low is $1... right now at $1.52)

GLUU (the only liquid stock I could find with 9 red candles)

Watches Thursday Nov. 6

ALU LNG ESLR RZ CVI RRR GPBC EGO PNK RCNI

All of these are excellent on $DJI red days, and decent on $DJI green days.

Also watching ABK long. It's getting down to where I find it extremely interesting. If it breaks $2 on the downside tomorrow I will watch carefully and may load up for a bounce/swing play (rare for me) up to $3.

** UPDATE

As successfully predicted by the gap stat calculator, ABK gaps down on huge losses. Now it sits in the 1.6's. This is why I didn't buy ABK yesterday. 

The time has come

From the title you might think this is a political post. Well I will save that for another time. What I need now is to move more of my analysis to automated form and also to make it more publically available. My overarching goal is to bring actual data to concepts that good traders know and evaluate instinctively and qualitatively, but not quantitatively. The reason some traders like to trade one stock is that they get to know its characteristics, including its gap tendencies, its intraday movement, and and its movement with the overall market. The good news is that these characteristics can be quantified and therefore evaluated and assimilated in less time. I call it the triumph of science.

This is not to say that trading can ever become automated. Despite what I said above, I believe just the opposite. There is no substitute for years of watching the markets and trading. But what I strongly believe (and what I hope I have already proven to you by the creation of the gap stat calculator and the co-relation calculator) is that quantitative analysis can bring powerful insights- the same insights that expert traders have always made, quietly and intuitively, without ever making calculations. There is more than one way to get to the end of the road, and I am trying to use what I know to get us all there sooner.

THE POINT OF THIS POST is that I need a programmer to help me, for which I am willing to pay. Ramtajogi, Slowpoke, Brian, this post is to all of you. Or anyone else that can help. Please email me so I can discuss my ideas in detail and work out some kind of arrangement. 

Watches Monday Nov. 3

PLA ASFI ANV MTG LNG TEN HTZ FDML ODP OMX

Most if not all of these are on Muddy's list also. Here are the stats for shorting on a $DJI red versus green day (explained here):

PLA      88/50

ASFI     72/61

ANV     70/40

MTG    70/55

LNG     77/44

TEN     85/50

HTZ     75/25

FDML  80/44

ODP     70/44

OMX    62/44

As you can see some of these remain decent shorts on $DJI green day (PLA ASFI MTG TEN) and some do not (HTZ).

New kind of calculator idea

I want to combine my 4 day up filter with the co-relation calculator idea to have a calculator that can indicate how many times a stock has gone up consecutive days in a given time period. Ideally, the number of days up could be changed, as could the time frame. When a stock is on a multiday run, it is useful to know how many times the stock has a similar pattern in its history. If a stock is on a 3 or 4 day run up, and hasn't had 3 white candles in a row before, that is a different situation than if that same stock has had many 6 or 7 day runs. Both scenarios are valuable for longing and shorting considerations. The opposite, X days down consecutively, could be used to compile a likely bounce watchlist. 

The ideal calculator would then have this format: 

[X consecutive days {up/down} for stock ABC over timeframe Y days] = ANSWER