I'll post a 2 charts on this stock - the daily chart shows what may be a possible selling opportunity and the weekly chart shows a nice possibility as well. Al C.
Holy Moly.... I'm still drawing stick men and happy faces, and al c. has moved on to oils and pastels.
If you wish to see more of the great charts that AC uses -- just <mailto:rickbrn@lvcm.com> and he will send them to you via a link. This system is great Thanks AC. Really does Work!
inandlong, You described your scan as "NR7/ID's with a low near term historical volatility." Does that mean you additionally require the NR7/ID to set up against a backdrop of low hisvol? In other words, is low hisvol a third component of your scan? If so, what are you using to determine low hisvol? Or are you simply saying that NR7 means low near term hisvol?
OK very interesting. Because I wanted to say NR7 bars are very often whipsawed both ways by an outside bar. I've seen it quite a few times the hard way. Probably requiring a close will filter some of that.
Sorry I missed the last two posts. My bad. T'kay, the close outside the pattern is for the triangle stuff, and not the NR stuff. But, since the trade is supposed to be a 1-4 day trade using trailing stops, your idea is an excellent way to prevent damage from the outside day. You make an observation that I haven't yet, when you say that very often the NR7 trade subject to the outside day. When I describe this setup to others, I always say that even though the outside day is the nemesis, looking at charts reveals that there are not that many outside days. I have not done any statistical run on it, and won't, that makes it too much like work. But, I am going to do this for the rest of the month, and it is because of your observation, and that Mon or Tues of this week there were a ton of outside days, consistent with the broad market action: every day there are about 100 or so of these trades between the NYSE and NAS using the volume and price limits I have selected, which are average vol 400K and price between 10 and 70. So for the rest of the month I will try to keep track of the total number of executions that would occur, and the number of outside days that occured too. I think it is a good study, and while only two weeks in duration, might give us a clue. Oh yeah, for me the entry is 1 tick, or 7-10 cents beyond the H/L of the previous day. And I have always looked at this as somewhat of a scalper play, ie., hit it with size and take the 30 cents when you get it. Only recently have I learned that it is designed to be a 1-4 day play. Also, I think knowing the ATR is a good thing. It makes sense that if we are trying to catch breaks, we'd like it to have some spring to it. IE., if the ATR is .5 and our ID is .3, we won't be looking at much profit potential. I am just reasoning here, so I might be wrong. On the other hand, if the ATR is 1.5-2 and our ID is .5 or so, ...etc. Here is an updated chart of FST. Interesting trade today, as the volume was somewhat normal, the low nearly touched the lower leg, and the close is at the upper leg.
Salzburg Crabel is credited with describing the NR7/ID setup. Connors added the Historical Volatility Ratio to it. I know you have seen a stock run 3-4 days with big bars and then stop for a day with an inside day. By adding the low volatility component, Connors is requiring that not only was today a compressed volatility day, but the near term period has been too. The ratio part compares the volatility of the previous six days to the last 100 days... I think it is 100, it has been so long since I coded it that I forget. He also uses the last 10 days too. Optimally, I recall his ratio limit as being .6 or less. As I would run stocks thru this setup on a spreadsheet, when one would qualify on all parameters, the consolidations patterns would be what I would end up seeing on the charts when I then looked at the chart. That is what made me conclude that this setup essentially quantifies the patterns that Edwards and Magee described. Of course it is not always the case, but you'd be surprised how many times you see these classic patterns. One more thing I am currently looking at, and again for me it is as a scalper type trade. I am not a scalper, but catching these breaks seems to make sense if I am waiting for them to occur. I am looking at scanning for the last two days to be inside days. You see this pattern all the time, usually historically, and you see those neat little 3 bar triangles then boom a nic break for the day. Well this pattern is just the same thing but in a sense less stringent requirements. I am not using the volatility thing on it. Or the 4 or 7 day req either. Actually, of those 100 or so I mentioned in the previous post, not many of those qualify using the volatility thing. But, of the ones that are in some type of consolidation, those seem to work better. There are ways I am studying now that probably will reduce the number of candidates and increase the win ratio. T'kay's idea thought about trading with the trend... always a good thing... is sharp. I like the idea of requiring the inside day to be a smaller percentage of the ATR, or at least limiting the size of the inside day I am will to trade off of. Hey, after a 1.25 day, an 80 cent inside day is a candidate, but too big for me. I am not will to accept an 80 cent end to end risk for this trade.