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ZignalsApps integrates the most advanced capabilities of Zignals trading tools with Seeking Alpha's depth of content to offer convenience and research horse power, all on a single page. ZignalsApps delivers in two forms: [1] Powerful investing applications suited to your individual needs [2] A... More
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  • PatternDNA; Long & Short Ideas: Nov 29th
    Richard Hyde has been following Jim Cramer's FADS CAN list of seven stocks: F5 Networks (NASDAQ:FFIV), Apple (NASDAQ:AAPL), Deckers (NYSE:DECK), Salesforce (NYSE:CRM), Chipotle (NYSE:CMG), Amazon (NASDAQ:AMZN), and Netflix (NASDAQ:NFLX). How do these seven stocks measure up in Pattern DNA?

    PatternDNA looks at the past 5-days of trading action and based on historical testing offers a projection forward for this pattern over the next 5-days, and a cumulative return based on a defined Target&Stop strategy. For the purpose of this post we will use the default Target&Stop strategy of Target: 15%, Stop: 10%, Trail Target of 10%, Trail Stop of 5% and a Profit Target of 25% with pattern performance set on the Strong Match level - a step below the Strongest match but it gives a sub-set of statistics for the Pattern. In some cases, the Pattern will show no historic match (other than the current Pattern) so there will be no-data.

    Stock No. of
    Patterns
    1-day
    % Win
    2-day
    %Win
    5-day
    % Win
    Target&Stop
    % Return
    FFIV 38 52 59 46 -2.4
    AAPL 124 49 48 47 -3.5
    DECK 76 38 28 46 -4.1
    CRM 0 - - - -
    CMG 9 30 58 72 3.0
    AMZN 8 83 83 91 16.6
    NFLX 4 50 16 0 4.4

    FFIV, APPL and DECK all exhibited common Pattern behaviour, but the Patterns tended to favour the bear side, particularly in the case of DECK's 5-day action. The 5-day Patterns for CMG, AMZN and NFLX were rarer. CMG 's pattern (BABBA) favoured steady gains over the following 5-days. AMZN's pattern (BAHAY) offered the most reward going forward; a 16.6% cumulative annualized return based on the afrorementioned Target&Stop with a strong percentage of winners over the next couple of days. The Pattern for NFLX's was hampered by the low number of historic matches, weakening any conclusion which could be drawn. 

    Tags: FFIV, AAPL, DECK, CRM, CMG, AMZN, NFLX
    Nov 29 6:50 AM | Link | Comment!
  • PatternDNA Market Scan is now Live!
    Zignals is delighted to announce the Market Scan for premium PatternDNA is now live. As an example of its capabilities we took it for a quick spin.

    The first step is to select a pattern. We have selected one from the Microsoft chart from September; to do this, simply left click on the chart and drag over the days of the pattern you want to select. You can select up to 10 days for a pattern.

    MSFT PatternHighlighted Pattern

    The next step is to find the optimum Match Level; does it work best tightly defined or is better when loosely adapted to trading action. To do this we adjusted the Match level for each step and compared performance based on Target & Stops. The settings used were 10% Target, 10% Stop, 10% Trail Target, 10% Trail Stop and Profit Target of 45%. The stocks were the default "Zignals U.S." list made up of AAPL, AMZN, BA, C, CAT, CSCO, DIS, HPQ, IBM, INTC, IP, JNJ, JPM, KO, MSFT, SBUX, T and WMT.

    Metric
    Weakest Weak Neutral Strong Strongest
    % Win 47.0% 46.8% 52.3% 63.9% 100%
    Avg Profit 7.9% 8.4% 8.0% 8.7% 8.9%
    Avg Loss -7.5% -7.2% -6.4% -4.2% 0.0%
    Return 0.1% 1.6% 4.8% 12.7% 17.9%
    Matches 258 171 79 17 4

    The strongest Pattern match offered 4 profitable trades. By selecting [List Results] you can view where these matches occur. You can see in the following image matches were found in MSFT (of course!), SBUX, DIS and WMT. While the MSFT was relatively recent it can be seen past Strongest matches were often forerunners to significant rallies.



    Even in the Strong Match (17 matches), Pattern failures tended to occur when the stock was trading sideways or after a rally.



    At this point we can further optimize by looking at different Target & Stop strategies. For simplicity sake, we are going to look at the Pattern performance without the Trail; this way we can set up two simple Alerts from the closing price of the Pattern to use as the Target and Stop for our Profits. For this analysis, the Strong match is used (to get a better sample size)

    Metric T:10 S:10 T:15 S:10 T15 S:15 T15 S:5 T20 S:10
    T20 S:15
    % Win
    72.2% 72.2% 91.7% 43.1% 63.9% 83.3%
    Avg Profit 7.0% 9.7% 10.6% 5.2% 9.7% 10.6%
    Avg Loss -4.1% -4.1% -1.4% -3.4% -5.0% -2.7%
    Return 8.4% 15.6% 15.8% 7.7% 13.5% 12.6%

    It's a relative toss up between using a Target of 15% and a Stop of 10% or 15%. It's a Pattern which doesn't perform well under the typical 3:1 risk reward ratio. In part, because Patterns like these tend to occur during bottoms, i.e. during periods of high volatility. So their success requires a broader stop to prevent an early exit. We shall adopt the 1:1 risk reward ratio with a 15% Target and a 15% Stop.

    The next step is to look for matches in the Market.

    The Market Scan at its Strongest setting found two matches over the past 10 trading days, United Steels Corp and Allstate. In the case of United Steels Corp (NYSE:X) the stock is offering a cheaper entry given it fell for the two days after the pattern was found. It is trading slightly down today at $44.51. The Pattern also occurred after a lengthy decline - unlike the second match for Allstate (NYSE:ALL) which appeared in the body of a rally.



    Stock Target Stop
    United Steel Corp (X) $52.81 $39.06
    The Allstate Corp (ALL) $37.03 $27.37

    Running the Match at the Strong setting found end-of-day matches (i.e. Pattern completed on yesterday's close) for Tuesday of EXPE, MAT, STT, TDC. Although all Matches occurred for stocks in a rally. There were 14 matches in total for the S&P 500 over the past 10 days.

    Stock Target Stop
    Expedia (NASDAQ:EXPE) $32.10 $23.72
    Mattel (NASDAQ:MAT) $27.52 $20.34
    State Street (NYSE:STT) $45.61 $33.71
    Terdata Corp (NYSE:TDC) $43.69 $32.29

    Remember, you can use the Alerts application to track when Targets and Stops are breached - keeping you informed of the key market moves as they occur.

    Go give the PatternDNA a spin (Market Scan requires the Premium version) and we would love to hear your comments and Reviews.

    Declan

    Disclosure: No Positions in any of the stocks mentioned.
    Tags: EXPE, MAT, STT, TDC, ALL, X
    Oct 13 11:03 AM | Link | Comment!
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