Quote from makosgu:
If a stock exhibits more than a 20% increase over 2 days but winds up being a wash or a loss within a 6-8 day period, is this still considered passing the cycle criteria?
I have enjoyed reading the ongoing discussion regarding time and length of various cycles. To answer the above question, we need to look at how we arrived at the point in time that resulted in the question being asked.
Jack Hershey operates from a standpoint of excellence. He seeks to minimize risk, and at the same time, maximize the ability of capital growth. Jack has posted numerous times about the compound interest formula advising others to plug in various numbers (test various scenarios) to determine their own optimal growth potential. Jack has pointed out (and the compound interest formula confirms) that increasing the number of cycles traded is superior to increasing the gain per trade.
Newtoet correctly interprets the results of the compound interest formula when he posts:
Quote from makosgu:
Therefore, if a stock is taking longer than 8 days it might very well perform well, but you end up holding it longer to reach your objective, thus reducing your ability to turn your your money more often and make more as a result.
Jack has often suggested exiting early to use those dollars in another stock (one beginning to take off) thereby increasing the number of cycles traded. Jack's use of 'eyeballing' the 'bulked' charts at the clearstation.com web site allows for quick determination of the 20% moves. Jack states:
We seek "20% moves occurring 5 or more times over the past 6 months materializing over 6 to 8 days" in order to capture "half of the move price move. Doubling 10% gives me a quick measure of the moves."
The Wealth-Lab Chartscript (and other methods of automation) seeks to quantify the "eyeball" methods used by Jack. Developed as a 'time saving device,' rather than a precision instrument, the Chart Script allows easier 'culling' of the initial Hershey Universe over use of the template analysis sheet. Used primarily for dry up and rank calculations, the fundamental use of The Chart script serves to reduce the time spent on analysis - maximizing the use our time as we seek to maximize our money velocity. Based on this view of the Chart Script, we then need to prioritize our Hershey Criteria. Since Jack has proven that an increase in the cycles traded increases money velocity, we can therefore place number of cycles higher in priority than strength of move AND number of days required to obtain that move. The 5+ cycles is a minimum. The 20% move is a minimum. The number of days to obtain that move is a maximum.
The above hopefully has illuminated the terrain in which we currently find ourselves deployed. In regards to your questions determining if 'strict adherence' to certain criteria should be followed, several answers apply. In other words, it depends.
One area in which Jack has been known to 'break the rules' is with his list of 'tenured' stocks. In the past, stocks from this list did not necessarily follow 'strict adherence' to many rules - including the most fundamental rule of dry up. Jack states that these stocks become "like old trusted friends." He knows their tendencies extremely well. Profit from trading his 'tenured' stocks comes not from following 'strict adherence,' but rather, from the experience obtained from numerous cycles traded with these particular equities.
The many questions presented here, and the discussions resulting from those questions is one method by which 'iterative refinement' can occur. The process of 'iterative refinement' creates an environment in which fine tuning of Hershey's methods produces superior results. However, understanding the fundamental reasons behind the strategy must be the first step. I suspect that Jack wanted everyone to understand the fundamentals first - before moving on to automation. Furthermore, there is no Holy Grail - no one set of formulae that will produce the daily 'Hot Stock' about to break out. The individual rules used in trading the Hershey Equities Method are only parts to a much larger picture, just as the individual trees are part of a much larger forest.
Once again, many thanks to everyone contributing to these discussions, and to those sharing their efforts. Your contributions reinforce the understanding of the Jack Hershey Equities Methods for the more experienced, and clarifies certain points for those new to Jack and his theories.
Please feel free to continue.
-Spydertrader
. However, I am always happy to answer questions if I can help.