Based on the Mr. Goodbar study last week XLE emerged as a potentially superior daytrading ETF while XLE component stocks also produced consistent returns. This morning's scan of the XLE components suggests RIG as a promising candidate using our RSI model.
For today's study I've also added a stochastics trading model (10,2,2,85,25) to demonstrate the high correlation between the 2 indicator based trading systems. The Schwab platform limits my ability to display more than one trading signal set at any given time, so for display purposes I have arbitrarily chosen the stochastics model. You can see the lead/lag nature of the RSI and stochastics as trading triggers on the middle chart pane below. I'll continue to monitor the behavior of RIG with daily updates for the remainder of the week. Since this is a very short term trading model I'll rate performance based on both a 100 and 500 bar look back. I'll also look at 5 versus 10 minute trading bar risk/reward.
I'm not putting cash behind any of these trades at the present time. This is a work in progress and until parameters of the system are confirmed, made more robust and refined (money management stops, short component, longer range backtest) these posts should be regarded as exploratory only. Reader suggestions are always welcome.
As mentioned in previous posts, http://www.futurestruth.com is an excellent resource for those interested in learning more about algorithmic system trading.