Thursday, February 05, 2009

Qs 3 Finger Reverse

Here's the newest addition to the updated Qs KOP, the 3 finger reverse (3FR) system component. . . and I really like the way this one turned out. See yesterday's post for the link to the original 3 finger reverse post, which includes the TS 2000i coding. The settings for the Qs (with pyramiding turned on) are (54,16,12,10).

As with previous 3 finger lead and 3 finger reverse system studies, the goal is to identify sector or ETF component leaders and then ride the momentum of the outliers to pick up the lag in momentum in the larger sector or ETF.
Based on the previously posted risk map of the Qs, we can see that the largest market cap components of the Qs are ORCL, CSCO, MSFT, INTC, GOOG and AAPL. Picking the more volatile of these stocks suggests AAPL and GOOG and I've included RIMM as the third outlier just because I know from tracking RIMM for a few years that it's a great tell for short term Qs moves (a little nonlinear logic there).
I'll no doubt test out other outliers but the results of this study, with only 1 consecutive loser is very low risk. The max intraday drawdown is also very low, so from a risk exposure viewpoint this is about as good as it gets.
As with previous new QsKOP studies, we only looked back to 9/07, which works out well in capturing the 11/07 swoon when we consider the 54 bar look back that characterizes this study.

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