Momentum Index

Discussion in 'Trading' started by faure, Jun 18, 2008.

  1. faure


    Just as an experiment I've picked 9 highflyers to long and 9 dogs to short they are

    Alpha Natural Resources, Inc. ANR 96.00
    Continental Resources, Inc. CLR 72.38
    Ener1, Inc. HEV 8.09
    Gran Tierra Energy Inc. GTE 8.13
    Mechel OAO (ADR) MTL 52.09
    Pyramid Oil Company PDO 28.62
    Questcor Pharmaceuticals, Inc. QCOR 4.85
    The Mosaic Company MOS 159.38
    Vision-Sciences, Inc. VSCI 5.17

    Ambac Financial Group, Inc. ABK 2.11
    Downey Financial Corp. DSL 4.24
    IndyMac Bancorp, Inc. IMB 1.29
    MoneyGram International, Inc. MGI 1.22
    R.H. Donnelley Corporation RHD 4.01
    Radian Group Inc. RDN 2.84
    The PMI Group, Inc. PMI 4.36
    Thornburg Mortgage, Inc. TMA 0.65
    WCI Communities, Inc. WCI 1.62
  2. Those are good longs, but I would ditch the smaller speculative stuff like PDO.
  3. faure


    Stock you make some pretty absurd statements sometimes and you get flamed almost every post BUT the one thing you have over all the people who consider you a simpleton is that you realise, and what I'm trying to prove; that buying stocks that go up and selling stocks that go down is a easy way to make money.

    Livermore realised this.

    We'll see how it goes.
  4. Ansare


    People look at me like I"m nuts when I say the same thing. But after all these years, that's what I've come to know as THE bottom line--along with price is king and screw all the indicators, except as a parsley garnish on a great steak.
  5. If you are interested in a broader one, there is a professor who creates a long winners-short losers index for the whole market and updates it periodically on his website:

  6. faure


    Just an update and you can see the index is already up over 4.5% in a day and a half. We got lucky with TMA but will give this index more time. I will update the index and get rid of some of the names here and add a few new ones at the end of the week. Mainly just to get rid of the smaller stuff under 1b market cap as per stocktrad3r's suggestion.

    Alpha Natural Resources, Inc. -1.75
    Continental Resources, Inc. -2.67
    Ener1, Inc. 4.82
    Gran Tierra Energy Inc. -4.67
    Mechel OAO (ADR) 3.03
    Pyramid Oil Company -7.02
    Questcor Pharmaceuticals, Inc. 0.62
    The Mosaic Company -5.1
    Vision-Sciences, Inc. -5.03

    Ambac Financial Group, Inc. 3.79
    Downey Financial Corp. 12.97
    IndyMac Bancorp, Inc. 2.33
    MoneyGram International, Inc. 5.74
    R.H. Donnelley Corporation -1.75
    Radian Group Inc. 8.45
    The PMI Group, Inc. 8.03
    Thornburg Mortgage, Inc. 64.62
    WCI Communities, Inc. -0.62

    Index Return since inception, 4.77%
  7. faure


  8. Your long and short book aren't diversified across sectors; in fact they're both long and short highly correlated stocks. I would use rules such as

    Min allocation per sector 7.5%
    Max allocation per sector 25%

    on both the long and short side. A good starting point is the S&P classification of sectors

    Consumer Discretionary
    The Consumer Staples
    Health Care
  9. You could take it a step further, by going long on the strongest inside the strongest sector and shorting the weakest of the weakest sectors.

    The trick is to only do it in a retracement.

    For instance, you do not want to short support or buy resistance, no matter what.

  10. faure


    You're right, I was thinking about the fact that across both the long and short stocks, not many different sectors are represented. Right now it's basically a long materials and short financials index.

    I really like your idea, thanks for the input. I might have a 20/20 long/short portfolio with a min of 1 stock from each of the 11 sectors. I don't really like having a max allocation since I want as much of the portfolio invested in what is moving. With 11 out of the 20 stocks already allocated that leaves a max of 9 stock allocations to go into which ever sectors are performing. That way there is still diversification but some form of concentration aswell. This combined with a restriction of a 1b market cap could be very interesting.

    Performance will be measured over 52 weeks and the index will be adjusted according to performance every month.

    Any other ideas are welcome.
    #10     Jun 20, 2008