Basic building blocks for Dave Landry's Persistent Pullbacks will be :
Scan for 20 day persistence.
One way to do this is using our relative linearity or fractal efficiency scan. The Relative Linearity or Fractal Efficiency scan in Telechart can be done as:
(C - C20) / (ABS(C - C1) + ABS(C1 - C2) + ABS(C2 - C3) + ABS(C3 - C4) + ABS(C4 - C5) + ABS(C5 - C6) + ABS(C6 - C7) + ABS(C7 - C8) + ABS(C8 - C9) + ABS(C9 - C10) + ABS(C10 - C11) + ABS(C11 - C12) + ABS(C12 - C13) + ABS(C13 - C14) + ABS(C14 - C15) + ABS(C15 - C16) + ABS(C16 - C17) + ABS(C17 - C18) + ABS(C18 - C19) + ABS(C19 - C20))
Using above scan you can pick stocks with greater than +0.30 readings. They tend to have smoother trends.
Scan for 20 day persistence.
Or another way is by defining persistence as ability of stock to make say a new high every 3 or 4 days. A scan for that would be , if using 4 days:
Stock should be up 10 points in 20 days prior to pullback, one of the ways to do this is:
Some liquidity condition to eliminate low volume stocks:
This is just one of the ways to translate it in to Telechart.
Sometime back we looked at the basic philosophy behind swing trading . In that post we also looked at some of the books on swing trading. In next series of posts we will look at some of the details of method discussed in these books.
We will start with Dave Landry. The basic idea behind all the Dave Landry set ups is "pullback" in a strong thrust. The objective is to capture the thrust after the pullback. The method works only in stocks with momentum.
Dave Landry's Persistent Pullbacks
- Stock should have 20 bar persistence before a pullback.
- It should be up at least 10 points in 20 days.
- It should have a pullback.
- Enter when the trend resumes after pullback
- Rule for shorts are reverse of the buy criteria.
- Scan for 20 day persistence.
- One way to do this is using our relative linearity or fractal efficiency scan.
- Other ways is by linear regression.
- Or another way is by defining persistence as ability of stock to make say a new high every 3 days
- Stock should be up 10 points in 20 days prior to pullback
- Condition to indicate a pullback in stock meeting above condition.
- Condition to show trend resumption after such a pullback.
- Some liquidity condition to eliminate low volume stocks
- Very ugly action but not enough volume to support such a drop.
- This looks like buyers strike. In absence of buyers it is straight down move on low volume.
- In one week there will be quarter close, so chances of further weakness are low in my opinion.
- Most likely buyers will step in at some level to drive market higher just before quarter ends.
- In few weeks you have earning season starting. Earnings related strategies will still be my primary focus at this stage.
|Market Monitor ||Market in pullback mode after a|
big three month rally
|Daily||# of Stocks Up >4% on high volume||150|
|Daily||# of stocks down >4% on high volume||260||Another negative day.|
The pullback continues.
|Primary||# of stocks up >25% in a quarter||2529||Breadth is still positive. So this is|
in primary bullish trend.
|Primary||# of stocks down >25% in a quarter||437||There is no major deterioration in breadth so far.|
|Secondary||#of stocks up >50% in a month||17||Overbought levels are finally below 20.|
|Secondary||#of stocks down >50% in a month||3|
|Secondary||#of stocks up >25% in a month||101|
|Secondary||#of stocks down >25% in a month||31|
|Primary fast||MM 34/13 +||1926||This ratio will be the first to indicate|
breadth has turned negative.
|Primary Fast||MM 34/13 -||1374|
Market is ever changing.
Market is full of surprises.
Market is not predictable all the time.
Market is complex.
Market offers too many choices.
Market is full of traps.
Market is not controllable but.....
your methods are compltely under your controll. Your reaction to the market is under your control. What you can control is your own method to trade the market.
Trading decisions fall in to five "controllable" categories which I call Trading Mix:
1. What time frames to trade (trade frequency)
- Day trade
- swing trade
- position trate
- macro trade
3. When, where, and how to enter them (entry selection)
4. When , where , and how to exit them (exit selection)
5. How to manage risk (risk management)
how much to risk per trade
where to put stops
how and when to use margin
The profit opportunity is in the market if you get the mix of above elements right the result is profit. Each of these five variables are completely under your control.
There are many ways to find such stocks. One of the ways is by using a Telechart scan
(100 * (C - C21) / C21) >= 20 AND (100 * (C - C5) / C5) <= 0 AND (100 * (C - C5) / C5) >= ( - 15)AND (100 * (C - C1) / C1) < 2 AND C >= 5 AND V >= 1000
As of now the scan will give you 164 stocks. You can further reduce the list by taking only pullbacks which are within 8 to 10% of 52 week high or six month high.
If you want to take stocks within say 10% of six month high you can use the following scan to sort the above list:
(100 * ((C + .01) - (MAXC130 + .01)) / (MAXC130 + .01))
To further eliminate low liquidity stocks you can sort the list by Volume (Dollars) 1 day and take those with above USD 5 million volume.