Friday’s Cup-With-Handle

Well the first CWH gained 6.85%. I’m sure it is just a fluke, yet I choose to see it as a good omen.

Friday’s CWH watch is for [[ISG]] .

I’ve annotated the chart to show where I’m going to start testing for stops and profit targets.

I’m going to try using the bottom of the handle ($14.97) as a place for stops and will use the beginning of the cup ($18.71) as a profit target. These will be easy to test. I will update with results as they develop.

On the open, the Power Dip will buy DISH Network Corp. [[DISH]] .

There are no sells for today.

The system is now long Flowers Foods, Inc. [[FLO]] , otherwise known as the stock that never goes up, Fomento Economico Mexicano SAB (ADR) [[FMX]] , and DISH Network Corp. [[DISH]] .

Sorry for the late update.

I’ve been experimenting with a scan for the Cup-with-Handle chart pattern. I know, the CWH was so 2006.

The CWH setup uses fuzzy logic so it is hard to interpret the backtest results. The current settings produce a small annualized gain of 2.60% (including .008/share for commissions) starting 2/1/1993. Buying and holding the SPY over the same time would have returned 5.62%.

Keep in mind that a CWH is based on loose parameters. Refinement of these parameters could improve the performance. In other words, what makes one CWH better or worse than another? I don’t know. Given time and the inclination, I will begin to refine the parameters. At the very least, I am going to add some trend-filters to the setup to see how that affects the backtests.

With all this in mind, I will be screening for them every evening for a while to observe their performance. On average, there should be one CWH every few days.

Their was one CWH screened for Thursday, and it is Citi Trends, Inc. [[CTRN]] .

Pretty sweet looking chart, no?

Over the next several weeks, feel free to let me know if you find these CWH setups to be helpful or a waste of time.

The market continues to remain short-term overbought, and therefore the Power Dip is not establishing very many new positions.

There is one new position for Wednesday’s open, and that is Fomento Economico Mexicano SAB (ADR) [[FMX]] .

Also, Gray Television, Inc. [[GTN]] finally received a sell signal after yesterday’s move. This is another stock that should be watched in the premarket. It might be worth holding it for a few minutes after the open as it may be a gapper. Based on the triangle it has formed, it may be getting ready to make a much bigger move. Regardless, I will sell it here and take my profits.

Good luck trading today!

CSS Analytics has presented an interesting idea. It is interesting to me mainly because of the simplicity. The system just buys or sells the top 20 or bottom 20 S&P500 stocks based on their 5-day Rate-of-Change. Visit the blog  for more specifics: Relative ROC (RROC) as a Relative Stock Selection Mechanism (Part 1).

This seemed like an opportunity for a little blog piggybacking. Below you will find the top and bottom 20 stocks as of Friday, ranked by the 5-day Rate-of-Change.

For the week, the Power Dip was up 1.06%, while the SPY was up 4.65%.

The system had a few trades this past week where performance was impacted significantly. First, [[CHIP]] was stopped out on Monday. On Tuesday, CHIP still met the buy criteria, and so it was again purchased, only to stop out again on the same day it was purchased. That was a quick 2K+! And on Wednesday, CHIP was again selected, but I did not take the trade, for what should be obvious reasons. The decision was faulty, from a system trading perspective, but lucky, in hindsight. It turns out there was some news was released, and CHIP gapped way up, and then closed down, and would have once again stopped out. Those three trades would have cost the system over 3%. Since only two were taken, it cost the system just over 2%.

On Friday something happened with Pier 1 Imports, Inc. [[PIR]] . It was up in the pre-market. Since I had published the sell signal already, I used the opening price in the spreadsheet, but I would expect that anyone trading the system in real-time might have chosen to sell later due to the obvious interest in the pre-market. That would have been a wise decision as PIR closed up 16%.

The system is long three stocks: Gray Television, Inc. [[GTN]] , [[KERX]] , and Flowers Foods, Inc. [[FLO]] . On Monday’s open, KERX will be sold. New positions will be scarce until the market pulls back a bit.

The spreadsheet has gotten too big for WordPress, and so only the system statistics and October trades are shown. The equity curve is trade-by-trade, rather than each day’s closing equity amount, just in case anyone was wondering. It doesn’t really matter since it is hindsight, but if not for back-to-back CHIP stop outs and selling PIR on the open rather than on the close, the system would be very near hitting new highs. Perhaps the system will have a little good luck this week to even out this past week’s mediocre performance.

The Power Dip has been moving to cash. On the open, Pier 1 Imports, Inc. [[PIR]] and The Hain Celestial Group, Inc. [[HAIN]] will be sold.

This will leave 3 open positions: Gray Television, Inc. [[GTN]] , Flowers Foods, Inc. [[FLO]] , and [[KERX]] .

There were no buy signals for today.

Have a great day trading!