Market direction indicators, 1

If your trading strategies include a short-term one in which you buy breakouts to new highs or short sell breakouts to new lows, then you urgently need to take a look at the empirical research data complied in How Markets Really Work: A Quantitative Guide to Stock Market Behavior

I don’t know if Larry Connors is same guy as Laurence A. Connors, but if he is, then he’s also the co-author of the popular trading book Street Smarts: High Probability Short-Term Trading Strategies

This week I’ll discuss some of the conclusions by Larry in his book How Markets Really Work: A Quantitative Guide to Stock Market Behavior

Breakouts to New Highs/New Lows

In general, Larry observed that over the short term (1 day and 1 week), it’s profitable to buy new market lows (instead of highs) and to short sell new market highs (instead of lows).

In particular, over the short term (1 day and 1 week later), following:

a) 5- and 10-day breakouts to new highs, the markets declined;

b) 5- and 10-day breakouts to new lows, the markets rose;

c) 5- and 10 day breakouts to new highs when price is under the 200-day moving average, the markets declined;

d) 5- and 10 day breakouts to new lows when price is above the 200-day moving average, the markets rose.

...cont'd tomorrow...

Website Home has MOVED to:
http://LeisurelyCashFlow.Googlepages.com

Copyright 2008 Raymond T. Lee. All rights reserved.
LeisurelyCashFlow
eMail me Comments