Thursday Power Dip Signals

Woodshedder is still on vacation but Power Dip will close out the following trades on Thursday’s open in his absence:

Silgan Holdings Inc. [[SLGN]]

… and replace it with the one and only:

Intel Corporation [[INTC]]

Power Dip is also generating signals for the following candidates:

Skyworks Solutions, Inc. [[SWKS]] Semtech Corporation [[SMTC]] ADTRAN, Inc. [[ADTN]] National Instruments Corp [[NATI]] Cirrus Logic, Inc. [[CRUS]] Sempra Energy [[SRE]] Emerson Electric Co. [[EMR]] Penson Worldwide, Inc. [[PNSN]] ZymoGenetics, Inc. [[ZGEN]] Merck & Co., Inc. Merck & Co., Inc. Merck & Co., Inc. Merck & Co., Inc. Merck & Co., Inc. Merck & Co., Inc. Merck & Co., Inc. [[MRK]] [[ATSG]]

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Although camping with the family at a top-secret hidden location, Woodshedder is still finding the time to check in on his beloved blog from the local McDonald’s while on his morning sausage McMuffin run.  Wood, we appreciate your dedication!

The system will close out the following trades on Wednesday’s open – for gains:

Ritchie Bros. Auctioneers (USA) [[RBA]] InterMune, Inc. [[ITMN]]

… and replace them with the following:

The Hershey Company [[HSY]] Zebra Technologies Corp. [[ZBRA]]

a 10% stop works very well for these and positions should be sized accordingly.

Although the model portfolio is full, Power Dip is also generating buy signals on the following, some of which are also worth a closer look:

Genpact Limited [[G]] Ocwen Financial Corporation [[OCN]] Target Corporation [[TGT]]

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Brandon here reporting for Woodshedder again.   As I lack Wood’s southern charm and gentlemanly ways, I will keep this short and sweet.

The system will close 6 of its 8 current positions at the open Tuesday morning.  As of Monday’s close, all 6 of these are winning trades.

[[AOD]] Aeropostale, Inc. [[ARO]] ON Semiconductor Corp. [[ONNN]] STMicroelectronics N.V. (ADR) [[STM]] Union Pacific Corporation [[UNP]] True Religion Apparel, Inc. [[TRLG]]

There are also 6 new signals tonight for trades that the “robot” will initiate at the open.  As the system is closing out 6 trades tomorrow, all of these will be added to the model portfolio.

Aspen Insurance Holdings Limited [[AHL]] athenahealth, Inc [[ATHN]] ATMI, Inc. [[ATMI]] InterMune, Inc. [[ITMN]] Silgan Holdings Inc. [[SLGN]] Vectren Corporation [[VVC]]

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This is Brandon, reporting for Woodshedder while he is away on vacation with his lovely wife and kids.

Wood’s last post before he took off summarized the Power Dip’s less than stellar July performance numbers so decided to follow that post up with some monthly performance figures for the Power Dip system over the past 10 years (120 months).    As neither of us have been actively trading this system for the past 10 years, we must rely on backtested results for these numbers.   This post is for the number junkies out there and you’ll have to forgive me for the lack pleasingly colored graphics.

Power Dip Average Monthly Return: 2.50%
Power Dip Best Month: 23.36%
Power Dip Worst Month: -8.55%
Power Dip Positive Months: 85/120 (70.83%)
Power Dip Outperforms S&P:    81/120 (67.50%)

You can view a complete monthly breakdown of all 120 months HERE

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The S&P500 gained 7.24% in July versus a gain of 0.62% for the Power Dip system. This is no surprise, as the system performed similarly in 2003 after the bottom was put in and the bull market roared ahead.

On Monday’s open, STMicroelectronics N.V. (ADR) [[STM]] and Union Pacific Corporation [[UNP]] will be sold, gaining better than 1% each.

This will leave six positions, and so the model portfolio will purchase two more positions on the open, from the following twelve signals:

[[AGNC]] , Aspen Insurance Holdings Limited [[AHL]] , athenahealth, Inc [[ATHN]] , ATMI, Inc. [[ATMI]] , [[AVNR]] , Baldor Electric Company [[BEZ]] , Intermec Inc. [[IN]] , KapStone Paper and Packaging Corp. [[KPPC]] , Novell, Inc. [[NOVL]] , Patterson-UTI Energy, Inc. [[PTEN]] , REGAL-BELOIT CORPORATION [[RBC]] , and TEKELEC [[TKLC]]

From these choices, the model portfolio will be buying BEZ and PTEN on Monday’s open.

Vacation!!!

My good friend and fellow system trader Brandon will be updating the blog with the Power Dips this week as I will be on vacation. Feel free to ask him questions in the comments section, but since blogging is not his primary endeavor, don’t be surprised if there is not a prompt reply, or any reply at all.

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Monday, July 27,  marked the first time since early 2008 that the 200 day simple moving average (dsma) of (SPY: 97.89 -0.47%) turned up.

This development presented a good opportunity to test a new idea. The idea is to go long if the 200dsma is higher than the previous day and the close is above the 200dsma, and sell the long position and go short if the 200dsma is lower than the previous day.

You might want to visit other variations of this theme here: Variation 1 and Variation 2.

The Method:

Variation 3: Buy the SPY if the 200dsma is higher than the day before and the close is above the 200dsma. Sell short if the 200dsma is lower than the day before.

The exit signal for long positions is generated if the 200dsma is lower than the day before. The long exit signal is also the short entry signal, and vice-versa.

All variations compound gains (this is to make for an accurate comparison to buy-and-hold investing) but do not include commissions and slippage.

The Results:

Summary:

This system beat buy and hold handily (5.02% return for B-n-H during the same period) and reduced the drawdown significantly (56.47% drawdown for B-n-H).

During this period of time, the short side trades worked extremely well (the average winner was 6x larger than the average loser). However, if we go back to 1929 on the SPX, we will find that this hasn’t always been the case. I will have another post up going back on all SPX data for the sake of comparison.

These results show that adding the short trades might be worth the extra exposure, versus earning a risk-free return on cash when the 200dsma is downtrending.

But before we take this study to the bank, we will need to examine how this setup has performed over all the history of the S&P500.

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Despite the strength yesterday, the system is still finding dip-buying opportunities.

I will be going on vacation next week, and I’m not sure yet that I’ll have access to the interwebs. Accordingly, I may not be able to update the blog when any of these need to be sold. Also, I am not going to add any of these today in my own account, even though [[ORLY]] and Advance Auto Parts, Inc. [[AAP]] will be sold on the open.

Once ORLY and AAP are sold, the model portfolio will have eight positions. I will update the spreadsheet and post it in the near future.

Here are the dips for this morning:

athenahealth, Inc [[ATHN]] Blue Coat Systems, Inc. [[BCSI]] Brocade Communications Systems, Inc. [[BRCD]] FormFactor, Inc. [[FORM]] Lam Research Corporation [[LRCX]] LKQ Corporation [[LKQX]] MarkWest Energy Partners, L.P. [[MWE]] Novellus Systems, Inc. [[NVLS]] Pride International, Inc. [[PDE]] Parker-Hannifin Corporation [[PH]] U.S. Gold Corporation [[UXG]]

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