Patterns and context | stockbee

7/09/2007

Patterns and context

Mike a regular reader emailed this in response to Rare Hight Tight Flag Offers Investors Opportunity for High Returns.
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Feel free to put this on the site or in a comment if you like; I didn't want to offer a contradictory point.

When I read your post I thought...wow, that's a good idea to look for a good pattern. So I threw it into AmiBroker and this is what I did:

- look for something that doubled or more in 40 days
- look for something that has dropped at least 10% but no more than 20% in the last 15 days
- close > 5
- volume (moving average 20 days) > 500000

The stocks and dates that met these criteria as well as some data from 1/1/2007 to 7/6/2007 are listed. If anything, it's a good short scan. Almost every stock dropped further or at best went sideways after this pattern. I havn't had time to play more to see what happens if I change criteria but thought I'd give you a quick heads up. Maybe my scan was wrong?

columns are:
ticker
date
close on date specified
amount up over 40 days prior to date specified
amount down over 15 days prior to date specified


Ticker Date/Time close close close close
ASTI 5/7/2007 8.85 1.12 -0.18 -0.18
CNIC 1/18/2007 5.1 1.74 -0.16 -0.16
DNDN 4/27/2007 15.15 2.58 -0.16 -0.16
GMO 5/7/2007 5.85 1.11 -0.12 -0.12
GMO 5/8/2007 5.83 1.07 -0.1 -0.1
GOAM 1/10/2007 8.49 1.03 -0.13 -0.13
GOAM 1/12/2007 8.82 1.23 -0.1 -0.1
HALO 1/18/2007 7.09 1.76 -0.1 -0.1
HALO 1/19/2007 6.99 1.61 -0.11 -0.11
HOKU 3/2/2007 5.11 1 -0.11 -0.11
HTI 1/18/2007 7.09 1.76 -0.1 -0.1
HTI 1/19/2007 6.99 1.61 -0.11 -0.11
LJPC 4/5/2007 6.02 1.01 -0.13 -0.13
LJPC 4/30/2007 6.33 1.04 -0.16 -0.16
MAMA 1/18/2007 5.1 1.74 -0.16 -0.16
NGA 6/7/2007 8.89 1.32 -0.15 -0.15
NGA 6/8/2007 9 1.18 -0.11 -0.11
ONXX 3/13/2007 25.79 1.11 -0.11 -0.11
OPBL 3/6/2007 6.98 1.05 -0.11 -0.11
TGEN 1/3/2007 5.53 1.84 -0.11 -0.11
TGEN 1/4/2007 5.51 1.7 -0.12 -0.12
TGEN 1/5/2007 5.41 1.52 -0.17 -0.17
YTBL 3/1/2007 8.55 1.85 -0.12 -0.12
YTBL 3/8/2007 8.34 1.65 -0.13 -0.13

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Here is my response:

I am not surprised by the results, if a tight flag appears late in the move, it will break down to downside. Also the entire IBD discussion is in context. One needs to take the earnings rate and whether it is first base. IBD examples of Taser and Syntex, both are of stocks which had like 500% plus EPS/ sales growth.
If you look at 1999-2000 you will see several such flags. They went on to make several 100% plus moves.
This thing is like Episodic Pivots, one can not trade it as a mechanical system, the interpretation becomes critical.

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