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PatternDNA Pattern of the Week: GZGGB

|Includes: CHRW, New Gold Inc. (NGD)

There was no strong Pattern from this week, so instead I took advantage of PatternDNA's custom select a Pattern. The Pattern was selected from the July reaction low in New Gold (NYSEMKT:NGD). The resulting Pattern, GZGGB, features a bearish day, followed by a neutral day, two more bearish days, and finishes with a bullish day.



The Pattern was run against 18 U.S. stocks and the following performance returned. The Average Return Per Trade assumes an initial stop of 10%, raised to 5% off the price reached on a 15% gain, with an ultimate profit target of 25%

Match
Level
Patterns
Found
1-Day
% Win
2-Day
% Win
5-Day
% Win
Average Return /
Trade
Weakest 225 46 50 57 3.9
Weak 157 46 56 57 4.4
Neutral 88 36 37 53 5.4
Strong 54 42 48 59 6.0
Strongest 6 0 40 60 12.3

At the weakest Match setting Pattern profitability was low, so the effectiveness of the Pattern is dependent on a rigorous fit with few substitutions. The six matches at the Strongest setting (across 18 stocks over the past year) offered 67% winning trades with an Average Return Per Trade od 12.3%.

However, the most interesting aspect of the Pattern may be the action on Day 2. Across the five Match levels there was a 54% probability of a lower close at the end of Day 2 compared to a 57% probabiltiy of a higher close at the end of Day 5. The trade statistics were more generous, with an average win percentage of 60% (using an initial stop of 10%). So the way to play this may be to wait until the end of Day 2 before going long.

Runing a Market Scan at a Neutral Match against the S&P 500 found 35 stocks sharing this Pattern. This dropped to 4 at the Strongest Match - upgrade to Premium to view these 4 stocks.

One match was C.H. Robinson Worldwide (NASDAQ:CHRW).

Zignals Chart Image