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Monday, December 23, 2013

Dow Leaders, 2013 Free Lunch and Fat Fingers

FAT FINGERS are popping up on a bunch of issues I watch and trade. I call them 'Big Stick Red Top', because they are usually a mark of topping issue. At-least I don't want to mess long with markets that behave so erratically after substantial advance.
XHB, VNM, BG, small one on SEA (since overcame), now this 30-year bond, and possibly TSCO.
This is not a coincidence.
FREE LUNCH of 2013
This strategy is from StockTradersAlmanac. I watched it last year. It worked
Full monty is here:
“Free Lunch”  is purely a short-term strategy... Traders and investors tend to get rid of their losers near yearend for tax loss purposes, often driving these stocks down to bargain levels. Research has shown that NYSE stocks trading at a new 52-week low on or about December 15 will usually outperform the market by February 15 in the following year.
I used similar  filters in Finviz:
50mln+ market cap;  50K+ average volume;  over $1 price
(they using 20mil market cap and 10K volume... c'mon, its a little bit out there, IMNSHO)
0-3% above 50day low;  50%+ below 52week high
The closer to 52week low, the better
Results as of  12/23/2013 BMO, shows alot of gold miners (no surprise here)
These results are so horrible looking. How can I even touch this garbage?..oh

UPDATE 12/24/2013
On a second thought here are my picks. High short interest may be squeezed, low inst ownership may be increased, etc ... all weak reasons. I rather buy strong stocks on a rise, but willing give it a shot with half-position size an about half of these:
Conservatively I should take 10% profit as soon as I have it, and not wait for mid February exit time-window. Entry low is the stop. No exceptions. Lets see...

UPDATE 1/16/2014
 Now their list is revealed, and surprisingly it doesn't match mine very much. WTF?
18 stocks they selected show an average profit of 15%, with couple of small losers and  several big winners.
I traded:
Now all out with small profit to show for my efforts, but I felt very uncomfortable, as this strategy goes against my philosophy of buying high and selling higher (also sell low and cover lower).

The idea for DOW LEADERS  came from here:
by Bruce M. Kamich, CMT (never heard of him)
This is another approach, very much in spirit of System 12. I see it can be used not only as warning signal, but also as strategic allocation tool. Here is the gist:
From time to time we like to dissect the Dow Industrials. We look at each component and classify it as being in a clear uptrend or a sideways/neutral trend or a downtrend. Starting at 3M and going stock by stock to Wal-Mart Stores we found that we could only count 10 Dow stocks in clear uptrends even as the Dow made a new all-time high Wednesday. The 20 other stocks have been a drag on the famous average. This same exercise back in October 2007 found only 8 stocks making new highs while the remaining 22 were in bad shape (just think about the names that were subsequently removed)....We suggest keeping a closer watch on those ten uptrends – MMM, AXP, BA, DIS, DD, XOM, GE, GS, NKE, and V – and if they weaken without rotation into the other names then a more defensive posture should be assumed.


Staying 50-70% invested. All long, bonds short (via TBT), with shorter and shorter holding periods. The bias is to reduce, protect gains, cut losses absolutely ASAP (if stock doesn't go in a market like this - it doesn't go at all).
I've been working inside this list, essentially for months, with only few changes.

My Free Lunch: (started buying on 12/24/2013):

New watch:

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