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
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
This piece of information can be easily found from our local newspaper under the stock section together with daily stock quotes.
To understand further, I did some research and found the following information from www.investopedia.com website.
"The highest and lowest prices that a stock has traded at during the previous year.
Many traders and investors view the 52-week high or low as an important factor in determining a stock's current value and predicting future price movement.
As a stock trades within its 52-week price range (the range that exists between the 52-week low and the 52-week high), investors may show increased interest as price nears either the high or the low.
A popular strategy used by stock traders is to buy when price exceeds its 52-week high, or to sell when price falls below its 52-week low.
The rationale behind this strategy is that if price breaks out from the 52-week range (either above or below) there will be enough momentum to continue the price move in a favorable direction.
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.
Traders and investors typically conduct additional technical and/or fundamental analysis for confirmation. "
Quite an interesting strategy so I decided to test it out on my metastock software and name it as "S-Trader 52-week High Low".
