Spydertrader's Jack Hershey Equities Journal

[Spydertrader]

Quote from newtoet:

Great journal - a few questions as I am new to Jack Hershey.

1. How do you calculate the rank that is referenced in your Hotlist? I know it is in the Chart Script, but I would like to understand what the rank means. Also, when I plug these symbols into Chart Script, I show a rank different than what you list - why?
2. Your Hotlist is culled from the 30 - in the example above, are the ones that are on the Hotlist the only ones from that 30 that meet the 4 criteria you list?

Thanks!

Attached, please find an assessment sheet written by dkm. This may help you to calculate rank. On the MSN Web Sites listed in the second post and in the following thread:

http://www.elitetrader.com/vb/showthread.php?s=&threadid=21354&highlight=hershey+equities+thread

Jack Hershey provides a detailed explanation of his methods and how to go about the process. Rank is a function of both the number and strength of cycles exhibited by the stocks we look to trade. The higher the rank, the stronger and more frequently the stock price has moved for an individual equity.

The first function of a 'rank' differentiates the stock from those without rank. We create our 'Hotlist' out of stocks with ranks. We eliminate stocks from consideration that have no rank.

Jack recommends dividing ones capital into several 'streams' of money enabling the trader to maximize his / her money velocity. A trader uses one of the streams of money on one day, and subsequent streams for the following trades. Should the system trigger buy signals for two equities on the same day, Jack advises trading the higher ranked stock.

It is for the above two reasons we calculate rank - first to focus on the best candidates to trade, and second, as a tie - breaker.

As to why you have a different rank that I posted: I probably used an older version of my Chart Script without realizing. Thank-you for calling it to my attention. Review the link posted above to see how Jack describes completing the daily analysis sheet, and you should have a complete understanding of rank.

Hotlist: Jack teaches (in his stocktables.com lessons) to create three lists of ten stocks out of his 'initial universe' obtained using the criteria I posted earlier in the thread. This method has the effect of automatically scoring the stocks. The three lists of ten stocks (30) is then used to create the Hotlist. It is for this list (Hotlist) Jack Hershey teaches us to calculate the dry up for each, and if a stocks volume is in dry up the day before and exceeds dry up volume by 11:00 AM, we have a signal to go long (other criteria also apply - see criteria above). I have found that by keeping the daily Hotlists and merging them to create what I call a 'Final Universe' list we have more stocks in dry up the day before, and more opportunity to trade. As a result, I calculate the dry up levels for all my stocks in the 'Final Universe list' adding to it any stock from that Hotlist that was not previously in the 'Final Universe List.' Stocks in this list that exhibit dry up volume on the day before are placed into my 'Watch List.' This list of stocks is what I watch each morning.

Hopefully, the above provides some clarification for you.

- Spydertrader

 

[Spydertrader]

Quote from Moz:

Thanks for starting the journal Spyder, looking forward to it. I have been trading the equities method for about a year, so far I have not been able to find the groove yet. The last few months I have concentrated on ES trading and am thinking maybe I have been "inventing" in the stocks analysis. Really glad to hear you are having success with this, I hope to get there too. Some of the things I was doing wrong was chasing 7's, and also trying to catch stocks in the begining of their lower left to upper right price path, did not meet the 5 times/ 6 months rule. Do you find doing it to the letter is most effective, or are there nuances you use. Two things I get from the ES thread that I will try are stop inventing and look deeper in the box.

Thanks again

After reading through the extensive library of documentation provided by Jack Hershey first on Usenet and later on ET and MSN (two web sites), I noticed subtle differences in his methods. I arrived at the conclusion that his TC2000 formula based approach provided him superior results, but his stocktables.com methods provided a methodology perfectly designed for sharing his expertise with others. Since the stocktables.com methods closely mirrored his boolean equations, it simplified teaching. Now, this is ONLY my opinion, and I wish to stress that it is JUST that - my opinion.

based on that opinion, I began to look at the stocktables.com methods a little differently. By example, last November many stocks in the Hotlist triggered by signals each week (SINA and SOHU come to mind). However, in the Spring of this year days would pass without any signals. Something had to be missing if as Jack suggests "you should sell a stock and buy another day after day, and you will make money like taking water from a fountain."

As a result, I found that following his "universe culling" criteria to the letter worked best. Also, Entry criteria should be followed as Jack describes. The biggest "AHA!" moment came when I switched my charts to 30 minute time frame and included the MACD and Stochastic Indicators using Jack's settings (see second post for settings). Everything became crystal clear.

I only added the automation to save time over doing the tasks on paper. The only nuance I now have is that I am tracking numerous methods for calculating dry up volume to see which method works most effectively. The calculation of dry up volume appears to be the lynch pin to success with Jack's methods.

For my own trading improvement, I need to learn to draw those channels like Nwbprop does. He has had success with Jack's Methods as well.

Hope the above information helped.

-Spydertrader

 

[JohnnyK]

Quote from Spydertrader:


I hope you find the information contained in this journal useful.

- Spydertrader

Yes, very useful so far. Way to go. Looking forward to this.

JohnnyK

 

[Hombre]

Quote from Spydertrader:

.

The biggest "AHA!" moment came when I switched my charts to 30 minute time frame and included the MACD and Stochastic Indicators using Jack's settings (see second post for settings). Everything became crystal clear.


-Spydertrader

Spydertrader,
How many and which one's time frames do you look at ? Are the same settings used for all timeframes ? I am just assuming that you are not daytrading from 30 min charts.
hombre

 

[Spydertrader]

Quote from Hombre:

How many and which one's time frames do you look at ? Are the same settings used for all timeframes ? I am just assuming that you are not daytrading from 30 min charts.
hombre

When searching for stocks that have the appropriate number of cycles over a six month period, we use a daily chart. Jack teaches 'bulking' the charts through the clearstation.com web site as a method of 'eyeballing' the charts. I use Wealth-Lab Chart Scripts to perform the 'eyeballing' tasks for me.

From "The Big Post I-X" by Jack Hershey:

"The most significant principle is the P, V relation. It has two halves and I have added a corollary to make it complete.

If volume is increasing over time, then price will continue its trend, and If volume is decreasing over time, then price will change its trend. Since the author didn't complete the Boolean pair, I have added a subordinate corollary: If volume is unchanging, then the price will decay over time more or less constantly."

The above quote copied from the following Web Site:

http://sputnick5.www8.50megs.com/

We use the daily charts to look for the above principles. Each morning, I load my watchlist into Quotetracker to monitor Volume and Price. I set the alert functions in the Quotetracker Program (available at http://www.medved.net/quotetracker/ ) to signal an alert when volume has reached Dry Up Levels in each particular stock. If dry up levels are reached prior to 11:00 AM, I look at the MACD and Stochastic Indicators to check for the appropriate levels (settings and levels posted in Methods sections of this thread - same settings for the time frames I use). The time frame I use here (Jack calls them 'fractals') for monitoring is 30 minutes. Jack advises monitoring on one fractal and entering a trade on the next shortest fractal. Keep in mind that Jack phones his orders into his broker and uses market orders to enter into a trade.

Although I have held a stock for under a day (because it reached my target price in under 4 hours), I do not 'Daytrade' these methods. Jack teaches a trading cycle of 6 to 8 days. For this Journal, I use a 4 day cycle. A shorter cycle falls in line with Jack Hershey parameters, as Jack has often suggested that increasing the number of cycles (reducing the hold time) improves money velocity. I have no doubt that one could create a successful daytrading strategy using Jack's Fundamental Teachings as a foundation for such a trading system.

 

[dkm]

Quote from Spydertrader:

When a stock reaches DU Volume on a particular day, then reaches the same volume by 11:00 AM the next day, while in an uptrend, it is a signal to go long the stock. .

Thanks for starting this thread. I will follow with interest

On the particular matter of DU, it is my understanding that stocks on the daily hotlist should be *in* DU. What we are looking for is a volume breakout exceeding 3* DU by 11am with stocks that are in DU the day before. This points to the stock reaching First Rising Volume by market close. This should be accompanied by MACD 5,13,6 rising and diverging from zero.

I never did manage to resolve why many of the "zeroes" on the stocktables hotlist were selected but were clearly not in DU.

 

[Spydertrader]

Quote from dkm:

Thanks for starting this thread. I will follow with interest

On the particular matter of DU, it is my understanding that stocks on the daily hotlist should be *in* DU. What we are looking for is a volume breakout exceeding 3* DU by 11am with stocks that are in DU the day before. This points to the stock reaching First Rising Volume by market close. This should be accompanied by MACD 5,13,6 rising and diverging from zero.

I never did manage to resolve why many of the "zeroes" on the stocktables hotlist were selected but were clearly not in DU.

Dkm posts several important points that deserve discussion. The concepts of Dry Up Volume (DU), First Rising Volume (frv) and Peak Volume are continuing themes throughout the teachings of Jack Hershey.

I have seen Jack define the three concepts as follows:

du Volume: Lowest volume prior to a volume breakout
frv: 3 times du Volume
Peak: 2 times frv

We want to enter a stock as volume begins to break out. Since stocks that hit du Volume by 11:00 AM NORMALLY continue on to reach frv by the end of the day. Jack uses this 'pro-rata' approach to anticipate the volume and price breakouts for a particular stock.

Last November, many of the stocks on the Hotlist were in dry up. However, beginning in the spring and continuing through the summer until now, few (if any) of the Hotlist stocks were in dry up. As a result, I created a 'Watchlist' containing previously hotlisted stocks monitored from my "Final Universe List". This watchlist frequently has between 8 and 13 stocks already in dry up (using several different dry up calculations). In the last 30 days, only two stocks appearing in the Hotlist have also been in dry up (TASR and CRDN).

Since Jack uses an 'eyeballing' approach when 'bulking' stocks through clearstation after creating his lists at the stocktables.com web site, his calculation of du Volume should differ from the various other methods for calculating dry up. From Jack's Usenet Posts, I have seen him use "Three Stages of Dry Up." These three stages are TC2000 (Version 3.0) Equations that return DU1, DU2 and DU3 lists. A search of the Elitetrader archives yields several results for calculating dry up levels ('eyeball' lowest volume, 30% of 65 day average volume, 5 day average volume before price breakout, average lowest volume in six months, average 20 days before breakout). I hope to determine the 'best' method for du Volume Calculation by the end of this year. It is possible that the divergences noted in previous 'Hershey Equities' Discussions could have resulted from the varying methods of dry up calculation including Jack's own varying methods.

The following link contains numerous stocks monitored daily for Dry Up Volume. Clicking the "Column Formulas" link on the web site below provides a description of each column:

http://www.mbtrading.com/K9/K9.asp

Thank-you for your contributions DKM, both past and present.

- Spydertrader

 

[newtoet]

Quote from dkm:

On the particular matter of DU, it is my understanding that stocks on the daily hotlist should be *in* DU. What we are looking for is a volume breakout exceeding 3* DU by 11am with stocks that are in DU the day before.

This is confusing. I thought you were looking for volume to just reach DU by 11am, provided it was in DU the previous day. Please clarify. Thanks.

 

[newtoet]

Quote from Spydertrader:

For Monday, September 27, 2004

Here are my lists:

Sevens

ECSI
GDP
NIHD
PETD
RIO
CFC
DECK
TNP
BR
UPL

Ones

CLE
HDWR
ARTI
FTI
LEND
URBN
JOSB
CRDN
CYTC
INSP

Zeros

DRL
BR
ENWV
TNP
DECK
UPL
CREE
CTSH
ESMC
PMTI

Hotlist

symbol score float rank
ESMC 0 4700000 9.22
PMTI 0 12700000 5.24
CRDN 1 13800000 4.59
ENWV 0 6100000 4.41
PETD 7 15300000 3.46

Thanks for your efforts and patience, Spydertrader. My question is you have 4 stocks on the hotlist, culled from the 30 above. Do you arrive at the 4 by running them through the criteria listed - float, volume, eps - or am I not understanding?

Also, regarding the 30 stocks - 10 each in seven, zero, and one categories - I do not understand the relevance of the sevens, zeros, and ones. Maybe I am dense (very possible), but after the initial selection of 10 from each category, is there any significance to these category numbers?

 

[snooptrader]

Quote from Spydertrader:

Attached, please find a copy of my 'Final Universe' list for Monday, September 27, 2004. The watchlist below contains stocks in one form of DU Volume or another. I will watch these stocks to see if they reach FRV by 11:00 AM Monday. MACd and Stoch criteria also apply to signal a buy.

IDSA
NVEC
ANIK
LSCP
ALDN
EVCI
HANS
GMAI
LIFC
NAVR
SMTS
HLEX

Great journal. Are you using the DU calculation from the ChartScript results (link you gave in your first few posts), or are you calculating on your own? The reason I ask is that I looked at the DU in ChartScript and compared it to Friday's volume, and using those parameters the stocks were NOT in DU. What am I doing wrong?

Also, you said "I will watch these stocks to see if they reach FRV by 11:00 AM Monday." Didn't you mean if they reach DU by 11:00?