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This table shows statistics of 2 trade set-ups that are in play as of this past Friday's closing action in stocks.
The left hand column shows trade stats over the next 5 days after 6 consecutive closes below the open in SPY. The expected value of all trades is 1.24% gain closing the trade 5 days after the trade triggers (Friday's close).
The right hand column shows times in the current and in the prior bull market when a "3 month low" buy signal was triggered in my bottom spotting algorithm. Now currently the SPY is not triggering the signal, but the DIA (Dow 30 ETF) is triggering it. So I am suggesting here that using the stats from the SPY trading history will be appropriate for estimating the forward returns.
The expected value of all trades is 2.21% when closing the trade out 10 days after it triggers. Actually 9 days appears to have an even higher expected value. So if entering, the trade is planned to close on Aug 20 or 21st. Also note that the win rate is in excess of 75%. The average winning trade is 3.4%. If that average were to occur here, it would put the SPY up to about 215.00 in the coming 2 weeks.
ITM options could be used for some leverage here. I would suggest SPY strikes 204 or lower and still exit at the same time frame. If a rally does unfold, a few simple indicators could be used as contingent exits. I will discuss this as the trade unfolds.
I personally am going with a SPY Aug 28 expiration 204 call on this trade.
Pete
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