After looking at several indices - Dow Jones Industrial Average (DJIA), S&P500, Hang Seng Index (HSI) and Straits TImes Index (STI), it's quite fascinating to see how this strategy turns out on indices from different regions.
From the look of it, the market actions is quite like what been stated in our earlier blog topic "Introduction - 52-Week High / Low" posted on 7 May 2016.
When the market exceeds its 52-week high or low, it is not necessary the market actions continue it's preceeding direction but it may reverses.
Seeing that, it makes the analysis more challenging if one to use solely this strategy.
We also noticed the huge opportunities miss when one applies this strategy. Take a look at the chart below.
(Posted earlier on 15 May 2016 under "52-Week High Low Case Study - Dow Jones Industrial Average (DJIA)").
During the US Subprime Mortgage Crisis, it made a low of 6,469.95 on 6 March 2009 and the market rebounded to 52-week High of 10,228.20 on 9 Nov 2009.
A total of 3,758.25 points gained from the rebound.
Another example of chart (attached below) with huge points gained from the rebound in comparison to the 52-week High break out.
Big Fat Rabbit !
Huge opportunities not to be missed for long position traders.
Source :
1) Metastock
During 2008/09 US Subprime Crisis, Hang Seng Index (HSI) touched its 1st 52-week Low of 19,220.28 points on 11 Sep 2008. Thereafter, the market continued its downward and touched a new Low of 16,283.72 points on 18 Sep 2008.
That worked out a huge sum to gain for a short position, with a return of 2,936.56 points.
HSI rebounded to a high of 19,869.02 on 22 Sep 2008 which broke 11 Sep 2008 high of 19,854.82 before it reversed and continued its downtrend - New Lowest of 10,676.29 on 27 Oct 2008 was recorded.
Below is the chart on HSI with 52-week High.
Source :
1) Metastock
In the last post, we looked at 52-week High on Dow Jones Industrial Average (DJIA) during US Subprime Mortgage Crisis 2008/09.
In 2nd part of DJIA, we shall look at 52-week Low.
DJIA recorded its 1st 52-week Low of 11,634.82 points on 22 Jan 2008. Instead of continuing downtrend, it rebounded to a high of 12,767.74 on 1 Feb 2008.
A gain of +1,132.92 points (+9.74%).
This price action aligned with the alternative strategy which was stated during our introduction of 52-week High Low, as follow:
"Alternatively, another strategy is to sell when price reaches its 52-week high on the assumption that price will recede, or to buy when price reaches its 52-week low in anticipation of a value play."
Take note that the market lost -2,563.28 points (about -18% ) from its high of 14,198.10 points on 11 Oct 2007 to its 1st 52-week Low on 22 Jan 2008.
If we continue forward, we will make an interesting discovery that the 1st 52-week Low was not the lowest point DJIA hit during the crisis. DJIA touched its lowest point of 6,469.95 points on 6 Mar 2009.
In the coming posts, we shall look at S&P500 and some Asia markets indices before we conclude 52-week High/Low strategy.
Source :
1) Metastock
2) www.investopedia.com
