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  • PatternDNA Long & Short Update from April 1st
    The picks we reviewed for last week were drawn from a scan created by Alan Brochstein. The projections drawn from this group of stocks did not augur for big gains. The general neutral outlook underestimated some of the losses for individual stocks with Great Northern Iron (NYSE:GNI) and Ebix (NASDAQ:EBIX) giving up -9.0% or more.

    LaBarge saw a buyout which meant the stock jumped +6.7% on the week, although it was the only big gainer. Chase (NYSEMKT:CCF) and Spectrun Control (OTCPK:SPEC) were the only other higher closers at +2.3% and 0.3% respectively.

    PatternDNA had a 67% success rate from a small sample of three strong projections (and all three favoured downside). Given there was no strong upside projections, PatternDNA did its bit to keep out of the market in what amounted to very narrow trading on the week. 
    Apr 08 10:24 AM | Link | Comment!
  • PatternDNA Pattern of the Week: GGIEJEB
    Pattern of the Week was pulled from a reaction low in Microsoft's (NASDAQ:MSFT) chart.

    This seven day pattern starts with three bearish days, then three bullish days - mixed with a catchall day on the recovery.
    MatchNo. of Patterns1-day
    % Win
    % Win
    % Win
    Average Return
    Per Trade (> 5 day)

    Unusually, for a Pattern selected from a reaction low it wasn't particularly bullish. As the stringency of the Pattern match increased, the probability for a higher close on day 1 dropped (with the exception of the Strongest Match). 

    Day 5 performance was particularly interesting. A higher probability of a winning position on day 5 was countered by the Average Return Per Trade data which didn't correspond to higher returns (Average Return Per Trade assumes an initial stop of 10%, raised to 5% off the price reached on a 15% gain. Ultimate Profit Target of 25%). This was because the win percentage on the longer time frame didn't increase beyond the initial 58% and the average loss per trade got worse as the Match level increased.

    For those looking to milk a trade from this Pattern (perhaps buying on the open of day 2?) there were 115 stocks matching at Neutral. This dropped to 19 at the Strongest setting.

    One of these stocks was Rowan Companies (NYSE:RDC).

    Tags: RDC, MSFT
    Apr 01 12:21 PM | Link | Comment!
  • Long and Short Ideas for PatternDNA, April 1st
    This week we go for 11 stocks from Alan Brochstein. In his screen he is looking for low PE stocks which are flying under the radar, but growing rapidly. He has a preconfigured scan of:
    • Market Cap > $100mm
    • 1yr Sales growth > 20%
    • 1yr EPS growth > 20%
    • Trailing PE < 16
    • Net Debt to Capital < 50%
    • ROIC > 10%
    • 1yr Return Vs. S&P 500 > 0
    • Analysts Covering < 3
    A modified Zignals screen could look something like this (offered 31 stocks):

    Alan's eleven stocks were: DDI (NASDAQ:DDIC), Seaboard (NYSEMKT:SEB), Rudolph Technologies (NYSE:RTEC), Great Northern Iron (NYSE:GNI), Chase (NYSEMKT:CCF), Spectrum Control (OTCPK:SPEC), Emagin (NYSEMKT:EMAN), LaBarge (NYSE:LB), Preformed Line Products (PLPX), Ebix (NASDAQ:EBIX), and Dorman Products (NASDAQ:DORM). PatternDNA rated them:

    Stock No. of
    % Win
    % Win
    % Win
    Average Return
    Per Trade (> 5 day)
    DDIC 115 44 39 47 2.4
    SEB 379 43 40 51 2.7
    RTEC 65 38 50 53 2.5
    GNI 458 53 53 57 4.0
    CCF 24 52 53 58 3.5
    SPEC 181 37 44 53 2.9
    LB 84 41 43 54 3.0
    EBIX 277 52 50 51 3.1
    DORM 44 40 40 41 2.0

    A very non-descript set of projections for next week. The only notable was it marked the first week there was no stock which offered a greater than 60% projection of a higher close based on its 5-day trading Pattern.

    Of the stronger projections, DDi (DDIC), Rudolph Technologies (RTEC) and Spectrum Control (OTCPK:SPEC) were the only stocks to offer a probability of a lower close; the former on day 2 after the Pattern (i.e. tomorrow), at 61% and the other two on day 1 (i.e. today's close), at 62% and 63% a piece.
    The Average Return Per Trade (Average Return Per Trade assumes an initial stop of 10%, raised to 5% off the price reached on a 15% gain. Ultimate Profit Target of 25%) was also disappointing. Great Northern Iron offered an Average Return per Trade of 4.0%, but this was off an uninviting 58% winners - winning trades garnering 12.3% on average, losing trades giving up -7.4% on average.

    The net projections were also a little bleak. The average probability for a lower close today was 56%. Although today's unemployment figures would suggest this will be one of the 44% of cases where the market will close higher.
    Apr 01 11:55 AM | Link | Comment!
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