After months of dislocation, moving averages are beginning to catch up with equities. This is a good thing as most of the strategies I trade have at least one moving average as an integral component.
One of the systems that has performed reasonably well this year (46.82% annualized ROI; 56.6% win rate; .53% average net change/trade) is the Power Dip. This is a classic dip buying strategy. It is only because of sound money/risk management that this long-only system has survived the great bear of 2008.
The last signal issued by the Power Dip was in late September. Today the system was very very close to giving a signal for MAXY, for a buy on tomorrow’s open. Technically, the strong close today means MAXY didn’t make the cut, but the difference between triggering the entry and not is neglible. Therefore I still like the setup.
Following the rules will require using an 8% stop with an exit the morning after an RSI2 close over 80. The stock can be held for a maximum of 3 days, and then it must be sold.
Caveat: I believe MAXY is a biotech. Beware that biotechs have an affinity for blowing off arms and legs of those who trade them.
Are you using the 20-day SMA? Nice hammer on MAXY.
I love the 20-day SMA. I have tried to design a strategy around it. Not much luck yet. This particular strategy does require a rising 20 day, to ensure one is not dip buying a stock that is not climbing.
The 20, 30, and 50-day’s are pretty much standard for me. I can’t enter a long without looking at the 20-day first.
Woody,
Thanks for the strategery (sic) this year. Look forward to following your blog in the year ahead. All the best to you, your family and goatee in 2009.
Hopefully the old Wood will return in 2009 😀
Have a good one.
Dayum, that MAXY looks like I wanna hold it for more’n three days.
nice call.
________
Jake, 4.9% gain on MAXY, if you bought the open. Its a hot system. But it needs some bullish trending to perform well.
Thanks Anton, and Cubs! I’m working hard to get a year in review post up, before I head off to parties. Maybe I’ll get part 1 done.
Happy New year to ya’ll, in case I do not get the post up!