SPY closing beneath the lower Bollinger Band creates a bullish setup for the next 1-3 days.
The Setup:
Today SPY closed beneath the lower Bollinger Band, 2 standard deviations below a 50 period mean (50,2). See chart below. The chart looks nasty, but testing this setup shows how we can be fooled by how things look on a chart.
The Rules:
- Buy SPY at close when it closes beneath the lower Bollinger Band (50,2).
- Sell at the close X days later.
- No commissions or slippage included.
- All SPY history used.
The Results:
Summary of Results:
This study has a decent sample size with 102 occurrences of this setup. The next day edge is very strong but any gains from an immediate bounce have been worn away after a week and a half (8 days).
The results suggest that there is a good chance that the markets will see a close lower than today’s close sometime in the next month. However, over the intermediate term, this setup suggests the possibility of gains of 2% or more above today’s close.
Wicked post! Thanks Shred.
Hey, no problem! Hope I’m right!
would love to see the results when you ad a rising 200 sma to the requirements for a buy. great post.
Dis, tell me how you want me to quantify a rising 200 sma and I will run the test. Very simple to run.
How about something simple like using 200sma – 200smaNdays ago: if positive, 200sma is “up” – if negative, 200 sma down. N = periodicity of bollinger band N – or in this case 50 days.
Here, we would have a 200sman UP as today’s 200sma > 200sma 50 days ago
Just a thought
As usual you are an invaluable part of this site, thanks
Seriously, thanks!
I was looking for 2% too, until the recent downtick. I am now looking for 4%.
4% would be supreme and is not out of the realm of possibility!
Great study. Love these readings. with PPT showing oversold, I think i should have backed up the truck. i am loading up on CLF tomorrow. Bot a dickload of WieNeR today and ORCL
Evidently, WieNeR’s are in demand.
Very very cool.
thanks you!!
I’m still getting oriented to the PPT and everything it has to offer.
How do you perform these studies? Is it a proprietary software?
jrom, I use AmiBroker to run these studies. Let me know if you have any questions.
Thank you, Mr. Shedder. Or do you go by Wood?