Spydertrader's Jack Hershey Equities Journal

acesheet · Apr 19, 2005

I have a suggestion for modifying the WL code to speed up the process of identifying the hotlist stocks. The chartscript I'm talking about is the most recent version called "ChartScript - Hershey Equities Rank v. 2.0.1".

The code currently calculates the rank (if there is one) for each stock that is entered. The code also paints the screen green if a stock is in a DU status. What could become somewhat tedious over time is entering in the stocks one at a time manually to find out if there is a rank or if the stock is in DU.

The WL website gives you a way to automate some of this by entering buy and sell signals in the chartscript and allowing you to scan a custom WL watchlist for signals. I haven't examined the script closely (yet), but what could be done in addition to painting the screen green and/or plotting out the rank is to place a buy signal (or more than one) into the chartscript if the stock has a rank and/or if the stock is in DU.

Once this is done you can just dump in the symbols from the nightly StockTables screen to determine whether they should be on the HotList and/or the JH Watchlist. You can also dump in the current final universe to do two things - 1) find out if they have lost their rank - in which case its my understanding that they leave the final universe and 2) determine which stocks from the final universe are currently in DU. People who own WL Developer can probably do all this already, but it would be cool to be able to do it on the website as well.

I'm a pretty fair WL programmer, but if somone is closer to the code (i.e. they wrote it) they may be able to incorporate this feature quicker than I would be able to. Otherwise I'll give it a shot sometime this week - time permitting.

-ace

Spydertrader · Apr 19, 2005

2005-04-19, Tuesday - Update

Our system triggered one trade signal today when actual volume for TASR exceeded calculated 50% pro-rata Dry Up Volume just after the open. We did not have price improvement ($7.56, down .41 from previous day close) at time of signal generation. MACD held steady (only slightly negative at -.0034), and The Stochastic Indicator fell within desired parameters (82.0934). As a result of the lack of agreement between volume, price, MACD and Stochastics, I took no action with respect to trading TASR (either long or short).

- Spydertrader

Spydertrader · Apr 19, 2005

Quote from acesheet:

I'm a pretty fair WL programmer, but if someone is closer to the code (i.e. they wrote it) they may be able to incorporate this feature quicker than I would be able to. Otherwise I'll give it a shot sometime this week - time permitting.

I'm working on widening the number of standard deviations included in Dry Up Volume range at present, and hope to have the tests completed soon. I plan to have these additions added to the next version of the Hershey Chartscript.

If you would like me to add the changes you propose to the next version, I would be happy to do so. Feel free to post your suggestions to the code changes here so multiple individuals can test in both Wealth-Lab Developer and through the Wealth-Lab.com web site.

- Spydertrader

smtrader · Apr 19, 2005

Quote from Spydertrader:

2005-04-19, Tuesday - Update

Our system triggered one trade signal today when actual volume for TASR exceeded calculated 50% pro-rata Dry Up Volume just after the open. We did not have price improvement ($7.56, down .41 from previous day close) at time of signal generation. MACD held steady (only slightly negative at -.0034), and The Stochastic Indicator fell within desired parameters (82.0934). As a result of the lack of agreement between volume, price, MACD and Stochastics, I took no action with respect to trading TASR (either long or short).

- Spydertrader

Spydertrader,

Let's say you get a volume alert at 50% pro-rata volume, and you do not take the trade b/c the parameters to buy are not meet at the time of signal generation. Then, at 100% DU volume, you get another signal, and things have improved to the point where all conditions have been met for the same stock. Do you enter the trade?

This happened to me with TASR, at 50% price was down and MACD was negative, however at 11am, price had improved (beyond last night's close), MACD had gone positive, and Stochastic remained above 75. I took the trade (paper trading), but apparently it was a bad trade, as I got stopped out at 5% before the market even closed.

Now TASR might be a bad example, as it has performed poorly lately, and gapped down 10%+ (as you mentioned) in pre-market activity. Do you look at this type of situation on a case by case basis, or always ignore the "second" volume alert once it has failed a pro-rata signal?

Spydertrader · Apr 19, 2005

Quote from smtrader:

Now TASR might be a bad example, as it has performed poorly lately, and gapped down 10%+ (as you mentioned) in pre-market activity. Do you look at this type of situation on a case by case basis, or always ignore the "second" volume alert once it has failed a pro-rata signal?

Yes, TASR is a bad example for several reasons - including gap open, earnings disappointment and chart pattern - but that doesn't reduce the validity of your question. Since the journal began, we have experienced the example you outlined above on four separate occasions. Three of the four fell into the "gap open" exclusionary rule (including TASR) and the fourth turned around late in the morning with volume increasing at an expanding rate (exceeding Dry Up Volume just after the 11:30 AM cutoff if I recall correctly) on extremely positive news. I did not trade any of these four. Of the three signals that fell into the gap open exclusion, two of the three would have resulted in losses. The third signal would have made 2%. The signal that generated 2 minutes after our time cutoff of 11:30 AM would have produced a gain over 10%.

My research of Jack's numerous posts failed to deliver a response that directly answered the question when I first noticed the phenomenon several months ago. As a result, I fell back on Jack's focus on lowering overall risk. Since I try to follow a policy of strict adherence to my trading rules, following my rules prevented me from taking the trades. Clearly, strict adherence to the rules, while lowering my overall risk, prevents me from taking a number of trades that do turn out profitable. Since capital preservation remains my top priority, I am willing to take fewer trades (and some might say reduced profits) in order to maintain a certain level of risk at which I remain comfortable. Another trader might feel perfectly comfortable with an increased level of risk. Each trader must determine on their own when to follow and when to break their trading rules. Insight into the timing of these decisions comes with experience, but ultimately remains one of personal choice.

Lastly, when determining if a change in status of an equity warrants a change in decision-making (like TASR today), a trader should look at the entire picture and not just price, volume, MACD and Stochastics. Unlike our example where unexpected extremely positive news preceded an increase in both price and volume, TASR still reported extremely disappointing earnings. No amount of price appreciation was going to change that fact. The news article I posted referred to TASR's EPS as nil. As a result, TASR now finds itself extremely close to being eliminated from our initial sort (we keep the stocks with positive EPS). By incorporating this additional information into a review of your trade decision, do you still arrive at the same decision to enter into a long position with TASR?

All of this is easy to see in hindsight, but by reviewing all the available data after the fact, we learn from our mistakes, and begin to have the ability to perform the evaluations faster in real-time. We rewire our brains, as Jack says, removing the bad habits and developing profitable ones.

I hope you find the above information helpful.

- Spydertrader

smtrader · Apr 19, 2005

Quote from Spydertrader:

By incorporating this additional information into a review of your trade decision, do you still arrive at the same decision to enter into a long position with TASR?

[/B]

You are absolutely right, I made a very poor decision. I am fairly new at this, so I keep finding more and more reasons to continue to paper trade for the time being, keep reading this journal (don't ever stop posting btw

) and anything else I can find on the subject.

As Jesse Livermore said, every mistake I make is part of the cost of my education.

Thanks for the lesson!

Spydertrader · Apr 19, 2005

Quote from smtrader:

You are absolutely right, I made a very poor decision. I am fairly new at this, so I keep finding more and more reasons to continue to paper trade for the time being, keep reading this journal (don't ever stop posting btw ) and anything else I can find on the subject.

You didn't make a poor decision. You made a decision without incorporating all the necessary information - nothing more. In addition, you made the (excellent) decision to publicly post your decision-making process and ask for input creating an opportunity for you to improve. I still make mistakes (and have made a few in a very public way), and I have been at this quite a while. Mistakes only become costly when we fail to learn from them. For whatever reason, most people tend to learn more from their mistakes, than they do from their successes. I know it works out that way for me.

Keep up the great work!

- Spydertrader

acesheet · Apr 19, 2005

quote from SpyderTrader:
I'm working on widening the number of standard deviations included in Dry Up Volume range at present, and hope to have the tests completed soon. I plan to have these additions added to the next version of the Hershey Chartscript.

If you would like me to add the changes you propose to the next version, I would be happy to do so. Feel free to post your suggestions to the code changes here so multiple individuals can test in both Wealth-Lab Developer and through the Wealth-Lab.com web site.

I've tested this on the WL website and it works. Give it a shot after you create a JH watchlist or two in the 'Watchlists' section. It will also create a banner type alert above the price chart. Please note that this is simply meant to help you screen the lists of stocks, its not a trading system at all. The code is in WealthLab's Chartscript language:

Code:

// --------------------------
// Code added by Ace 4/19/05
// --------------------------
var DUSignal,RankSignal : integer;
RankSignal:=CreateSeries();
DUSignal:=CreateSeries();

for Bar := 1 to BarCount - 1 do
  begin
  if AVERAGEGAIN > 0 then
    SetSeriesValue( Bar, RankSignal, 1 );
  IF DUHigh > curvol THEN SetSeriesValue( Bar, DUSignal, 1 );
end;
// ----------------------------------------
// Creating Signals for the Watchlist Scan
// ----------------------------------------
for Bar := barcount-5 to BarCount - 1 do
begin
  EnableTradeNotes( false, false, false );
  if not LastPositionActive then
    begin
      if GetSeriesValue( Bar, RankSignal ) > 0 then 
      BuyAtMarket( Bar+1,'Rank: '+
      FormatFloat( '0.00', 100*((AVERAGEGAIN)/((DAYS1+DAYS2+DAYS3+DAYS4+DAYS5)/5)) ));
     SellAtClose(Bar+1, LastPosition, 'Rank Detected' );
    end;
  if not LastPositionActive then
    begin
      if GetSeriesValue( Bar, DUSignal ) > 0 then
      BuyAtMarket( Bar+1,'In DU : FRV='+
      FormatFloat('0,0' , 3*AVERAGEDU ));
      SellAtMarket(Bar+1, LastPosition, 'DU Detected'); 
    end;
end;

Enjoy. Let me know if it works OK for you. I dodn't have any problem. Incidentally if you highlight the whole list of screening results you can copy it into Excel and sort it.

SpyderTrader have you considered using a normalized type of volume to look for DU? In other words look at volume as a percentage or fraction of some volume period. It might take a little work, but you could assemble statistics and study the variation of some of your most successful trades or trades that your eyeball told you were truly in DU. Assembling the stats may help you to get the elusive quantification of DU.

I know my eye always looks for what I call "white space" (my chart background is white) below a 50 MA of volume for many days or patches of days. I assume that's pretty much the ideal DU situation. I've found that my eye usually catches 20% to 70% of the 50MA of volume as "white space". Its an ongoing study...

-ace

Spydertrader · Apr 19, 2005

Quote from acesheet:

Enjoy. Let me know if it works OK for you. I dodn't have any problem. Incidentally if you highlight the whole list of screening results you can copy it into Excel and sort it.

Thanks for posting this code. I'll let you know how the tests turn out.

- Spydertrader

Spydertrader · Apr 19, 2005

2005-04-20, Wednesday - Lists

I used RS Setting of 90 and EPS Setting of 80 for the following lists

Stocktables.com
Sevens - Ones - Zeros
MACR - CYH - FFIV
USPI - BRY - ANSS
UTHR - CDIS - SYXI
LSS - LCAV - BEBE
CEDC - JLG - IPS
JOSB - AEOS - FORD
SNHY - EEFT - USNA
VMSI - KOSP - MEE
IRIS - ANTP - CMC
VLCCF - NXTP - CHTT

Wealth-Lab Chartscript/Manual
Hotlist

ANTP
FORD
SNHY
FFIV

Wealth-Lab Data/Yahoo Data
Watch List

DCAI - DU Cycle
TASR - DU Cycle
FRD - DU Cycle - DU5 - DU10
SYNA - DU Cycle - DU5
MFLX - DU Cycle - DU5 - DU10
SIGM - DU Cycle - DU5
EZPW - DU Cycle - DU5
SNDA - DU Cycle - DU5 - DU10
COGT - DU Cycle - DU5 - DU10
LCBM - DU Cycle
MIPS - DU Cycle
BCSI - DU Cycle - DU5

Wealth-Lab Developer Data & Equations/G33M4K Equations
SRVZ Wealth Lab Equations - Dry Up (with G33M4K Score)

No Stocks Qualified

Eyeball
Gallas2 "Keep an Eye on These" Stocks

UBET (Attached)

Yahoo Data/G33M4K Equations
Dry Up Stocks with G33M4K Master List Score of Zero

EZPW

Wealth-Lab DU Volume Range - Hershey V2.0.1 / QCharts Data
Dry Up Stocks and G33M4K Master List Score

BCSI - 4
COGT - 4
EZPW - 4
JUPM - 5
MFLX - 7
SIGM - 5
SNDA - 7
SYNA - 5

Stocktables Sort/Qcharts/G33M4K Equations/
Test Culling Method with Score Hotlist

USG 2
DCAI 5
ELOS 5
FORD 5
GDP 5
TRGL 5
FFIV 7
MFLX 7
PARL 7
XXIA 7

SNHY & ANTP failed to make the Final Universe List due to insufficient float.

<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=731871>

Spydertrader's Jack Hershey Equities Journal

Attachments