Methodology
In an effort to summarize the methods I use into one easy-to-follow document, I have edited several posts and placed them into one.
First, you'll need to head over to the
Wealth Lab web site and register for a free account. Once registered, Click the
My Preferences link in the left menu, and set your preferences as follows:
Chart Size: Small
Chart Style: Candlestick
Bar Spacing: 8
Click Submit.
Next you'll need to bookmark a few chartscripts and scans. Bookmark all three of the following by clicking the
Bookmark this Chartscript link for each:
Hershey Equities Rank v. 3.0.0
Hershey Equities Rank SCAN v. 1.0.0
Hershey Equities Dry Up Volume Scan v. 1.0.0
Next highlight and copy The Final Universe List. Here is the most recent list:
CKCM CMT CTHR DCAI DPTR ENER FORD GMXR HANS IIG IRIS JMDT LUFK NFLX NGAS NGPS RATE RTSX SNHY STV TRGL VDSI VIVO VPHM
At the
Wealth Lab web site, click on
My Watchlists in the left menu. To create a new Watch List, click the link titled:
Click here to create new watchlist Enter a name for the watchlist (Hershey Final Universe or any name will do) and then right click and paste the symbols (of the Final Universe) into the next box, add a description if you desire then submit.
Daily List Creation
Log onto the
Stock Tables web site. You can utilize the two-week free trial to avoid paying for a subscription. The following settings will produce a list of stocks we will call the
Initial Universe.
RS > 90
EPS > 80
Dollar min 10
Max dollar 50.
All is everywhere else.
Sort by % Volume Change.
Your initial list of stocks should total near 100. Alter the RS and EPS settings to achieve a number of stocks as close as possible to 100.
Download the data in Excel Format (You'll need
WinZip or another extracting software to open the data) onto your computer hard drive and Unzip the data. Once unzipped and opened, highlight the
symbols only, right click and copy.
Now that we have our
Initial Universe, head over to the
Wealth Lab web site, log in, and click on
My Watchlists in the left menu. To create a new Watch List, click the link titled:
Click here to create new watchlist Enter a name for the watchlist (Hotlist or any name will do which differentiates it from The Final Universe List) and then right click and paste the symbols (of the
Initial Universe) into the next box, add a description if you desire then submit.
Go back to "My Watchlists" and the new watchlist you just created should be listed there. Next click on link "Watchlist Scans" which is just 3 lines above where your watchlist is displayed.
Highlight The
Hotlist Watch List (the one you just created) in the left drop down box and highlight
Hershey Equities Rank SCAN v. 1.0.0 in the right drop down box. Then click "Begin Scan"
The scan will generate a list of all stocks In the initial sort which meet the criteria for cycling minimum of five times in six months. Copy this list and manually confirm each symbol meets the following criteria:
1. Have a float less than 60,000,000
2. Have a float greater than 5,000,000
3. Have a 65-day average volume above 200,000 shares
4. Have positive EPS.
****Remember: The above 4 points MUST apply to the stocks you KEEP. If the stock doesn't have the above 4 criteria, you MUST eliminate the stock from your Hotlist.
****
You can either use a free fundamental data source (Yahoo, MSN) to manually cull the list, or for increased speed, use QCharts. I use Qcharts. For a free month of Qcharts, send a PM to
SVRZ. He can send you the link for the free month.
Once you have completed the process above, you have your daily
Hotlist of stocks. We now compare our Hotlist to the Final Universe List. If any stock in the Hotlist does not find itself in the Final Universe List, add that stock to the Final Universe List. If all stocks in the Hotlist exist in the Final Universe List, do nothing, and move on to the next step.
Final Universe
Go back to
My Watchlists and the Final Universe watchlist you created earlier should be listed there. Next click on link
Watchlist Scans which is just 3 lines above where your watchlist is displayed.
Highlight The Final Universe in the left drop down box and highlight
Hershey Equities Dry Up Volume Scan v. 1.0.0 in the right drop down box. Then click
Begin Scan. The scan will generate a list of all Final Universe stocks that meet the criteria for being in volume Dry Up for that day.
Copy this list and run each symbol manually through
Hershey Equities Rank v. 3.0.0 which you bookmarked earlier. This will generate the figures you need to know for low band dry up volume, average dry up volume, and high band dry up volume, first rising volume (FRV), and peak volume. It will also show the symbols rank and score in the top left of the chart.
Using
Medved Quotetracker,
Qcharts or similar charting software create a watchlist or portfolio of the stocks in Dry Up for that day and set alerts for low band volume for each symbol. Set the chart to monitor on a 30 minute time frame. Add the following under the candlestick price chart: Volume, MACD Histogram (5,13,6), and Stochastics (14,1,3).
You have a signal to go long, once volume exceeds the low band threshold for an equity, price is higher than previous day, MACD Histogram is positive and Stochastics (%K) is above 80.
With respect to when one should exit, I have several rules, and each should be used depending on where we find ourselves in the price cycle.
1. First Day (Ross's Rule)
After entry - Exit when a 2% loss in equity price occurs (from entry price) or price heads into the negative (red) for the day (not since entry, but compared to previous day close). This is known as Ross's Rule.
At EOD - Exit if volume does not exceed FRV prior to the close.
2. Beyond First Day
Trailing stop - Exit anytime the 5% trailing stop is hit. If using an alternate stop strategy, exit when stops are triggered.
3. Peak Volume
Exit within the first 15 to 30 minutes on the morning after peak volume is reached.
4. Price Target
Consider an exit when price reaches the target price of 10%. This is more of a soft exit and requires an analysis of price location with respect to trendlines (Jack's and Nwbprop's Channels), how far the price has appreciated the entire run up (not just since entry), determining if the stock gapped up or not, and continued (or nonexistent) increases in volume.
5. Time
Exit after four days if no other exit criteria have been met. Jack Hershey uses a six to eight day time stop.
The above represents a brief overview of the methods I use. I
highly recommend reading through the Journal (at least once) and background material in order to gain a complete understanding of the nuances associated with these methods. Once you have developed an understanding of the process, practice trading the methods on a stock market
simulator until you achieve consistent profitability. When you decide to trade these methods with real money, use a broker that offers per share pricing and use
small share size initially. I currently trade through
MBTrading and highly recommend their services. The combination of fast executions, low commissions and outstanding customer service provides a trading environment quite difficult to beat.
Good Trading to you all!
- Spydertrader
