Friday, May 22, 2009

More Overnighters

Here are a few more examples of the Goodbar setup long, one short and one that sure looked like a short but didn't work out.
This time around I'm looking at 5 minute bars and focusing on a stock...CLF, which has been a trading favorite for several in the REWIND chat room.
Keep in mind that a high beta stock like CLF is going to act considerably more squirrelly that a buffered ETF like the Qs, but curiosity got the better of me and I decided to check it out anyhow since my goal is to create a robust setup whose rules can be applied to a variety of stocks and indices.
We had 2 out of 3 good trades here. The middle setup didn't pan out even though all the criteria defined yesterday were in place for an overnight SHORT . . . .with the exception of the parabolic SELL.
One difference between yesterday's Qs signals and these CLF signals is the position of the MACD histogram relative to the other MA and MACD trend lines. In the case of the CLF the horizon of the histogram, either positive or negative has tended to carry through into the following day's OPEN with, of course, our middle setup, providing a dramatic exception.
Our trigger signals clearly require more refinement in order to avoid these false setup traps in the future.
Part of the problem may be the use of CLF as a test case, since it's been the subject of considerable recent volatility after selling off 12M shares @$21 on May 14th.
Just another reason I prefer the risk muted ETFs.

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