In the previous posting, I discovered a huge opportunities missed when one uses the 52-week High/Low strategy especially the market rebounds from its low or reverses from its high prior to hit 52-week High or Low.
I decided to seek an alternative time period to complement the existing strategy.
It's mind boggling when I started this task.
If the extension is too short it will limits the usefulness of it. But if the extension is too wide it will creates more confusion to the traders/investors.
Then I came across a website with some useful information.
Attached below is the snapshot from the website with highlights on the section consists of the info.
(Website source : www.barchart.com)
Under "Percent Advances/Declines", there are set of different time periods. A good references.
With that info, I have created 2 new custom indicators called "S-Trader Multi Month High Low". and "S-Trader Multi Year High Low" to complement "S-Trader 52-week High Low".
The Multi Year will consists of 1-month, 3-month, 6-month, 9-month and 12-month.
As for the Multi Year, it includes the following period: 3-year, 5-year, 7-year and 9-year.
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
Before we wrap up on this topic, we take a final look on another Asian market - Straits Times Index (STI).
52-week Low
52-week High
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
We shall take a quick look at S&P500.
52-week High
A new High of 1,150.45 was recorded on 19 Jan 2010 after it achieved its 1st 52-week High on 11 Nov 2009.
That worked out with a gain of +45.08 points (+4.08%).
52-week Low
In this situation, we are not getting a new Low after it touched 1st 52-week Low. Instead, the market rebounded and made a gain of +121.73 (+9.6%).
A similar outcome with DJIA in our last two case studies.
Let us move on to the next market, Asia.
To see how the Asian market price reacts toward this strategy.
Source :
1) Metastock
In the last posting, it was stated as follow:
"A popular strategy used by stock traders is to buy when price exceeds its 52-week high or to sell when the price falls below its 52-week low."
We select DJIA market performance during US Subprime Mortgage Crisis 2008/2009 to study the strategy. Attached below is Dow Jones Industrial Average (DJIA).
During the crisis, DJIA recorded it's lowest of 6,469.95 points on 6 March 2009.
Thereafter, the market rebounded.
DJIA recorded it's first 52-Week High of 10,228.20 points on 9 Nov 2009 and the market continued to move upward and recorded a new high of 10,729.90 points on 19 Jan 2010.
Net gain of +501.70 points (+4.91%) based on this strategy.
Take note that the market recorded a huge gain of +3,758.25 points (+158%) from 6 March 2009 to first 52-Week High.
Source : Metastock
