The halls are decked with holly and wreathed succulents are paring with the aromas of the fire to create a lovely woodsman scent in my home. The animals are lounging and I couldn’t imagine a better way to spend my evening than at home opening Fly’s toolbox, The PPT. The unfettered celebration last night, which brought out the best/worst of my normally politically correct co-workers, was fun and dare I say outlandish. Pare that with the excitement of getting an interim position here, in the hallowed halls, and let us just say I’m just now returning to my senses.
The first time firing up The PPT is like stepping into a formula one racecar. Mario Andretti could configure a car to his exact specs, but you can’t expect to hop in and win the Grand Prix.
I look for a very specific chart pattern when I enter a stock. It doesn’t always look the same but the methodology is simple. There are two steps. Define a stock’s trend, and trade the pullbacks in the directions of the trend. That’s it, momentum trading. Sometimes I wrap a thesis into my positions, other times I seek diversification of industries.
The PPT clearly can increase the odds in trading with one data set alone, seasonality. I’m thrilled to build my understanding of The PPT scoring systems and building their probabilities into my trades, but I built my first screen to build the seasonality edge into my momentum trading. Thus the “Comeback Kids” was born, and I like what I’m seeing.
I built the screener to give me stocks that have underperformed their seasonality this month and tossed in a few fundamental ratios and volume thresholds to ensure I’m not getting any garbagio. The idea is mean reversion to seasonality. If any of the results fit a trading picture I like, I’ll stalk come Monday.
Several of the 37 stocks look ready to make a comeback. I really like Cooper Tire & Rubber (CTB). It has the look I like and a thorough seasonality dataset:
It has over 3% of mean reversion seasonality built into it, which coincides with the first logical scale out point, prior swing highs. Getting that first scale means I’ve done my job, and pumps thereafter are the cream (no homo).