From among 9,078 symbols in my database, I analyzed 4,052 having volumes of 500,000 and up priced at $15 and greater.
There were 13 breakouts to the upside, and 19 to the downside for a total of 32 breakouts.
Of those, 12 were tossed out because they failed to achieve odds in my favor. I want more than half of the previous breakouts in the direction of the current breakout to have been profitable. Like any trader, I'm looking for an edge.
An additional 11 were rejected because, although the odds were greater than 50%, the return was too low to make the trade worthwhile.
Four have earnings announcements within 30 days, triggering my exclusion rule.
And four had announced earnings the day before or had seen a very large move upon an announcement within the past few days. My rules disallow a trade under those circumstances. Basically, I'm looking for anticipation, not reaction.
That left one lone stock, a Brazilian retailer called Companhia Brasileira de Distribuicao (CBD) as the one potential trade worth a deeper look. It broke out to the upside, and has a 53.3% success rate in that direction, with an average return on winning bull trades of 17.5%. That yield adjusted by the success rate works out to 9.3%, well above my 5% minimum.
But, CBD failed the confirmation test. It opened this morning below its $46.21 breakout level and has traded below that level all day so far. My rules say that on the day after a breakout, I have to be able to enter the trade at a price above the breakout level.
So CBD joins the 31 other breakouts as not being a trade for me today.
Without the exclusion rule for earnings announcement scheduled within 30 days, I would have had four additional prospects: INXN, X, NTGR and M, all was which passed the next-day confirmation test.
On days like this, I'm tempted to loosen my rules to produce more prospective trades. I'm a trader, so not trading seems like slacking.
But my trading isn't an end but a means. I trade to make a profit. Each of those rules that knocked symbols out of the running are designed to better the odds of making a profit.
Not trading is a virtue if it keeps me from losing money and so today I wear the slacker label with pride.
My trading rules can be read here. A discussion of recent modifications to my trading methods, which haven't yet been incorporated in the original write-up, can be found here.
And the classic Turtle Trading rules on which my rules are based can be read here.
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.