Tuesday: No Trade

Two symbols came close to surviving today's advanced screening, and in the end, both were found wanting.

My initial screening of bull and bear signals from Monday's trading (see "Tuesday's Prospects") had left five symbols standing: Potential bull plays HNZ, CLB, PHI, LZAGY and TTNP, and potential bear play SBLK.

HNZ, the most liquid of the group, is involved in a take-over bid and so was excluded. The bear signal, SBLK, has average volume of 6,997, lacks enough open interest on its options to meet my standards, and is too thinly traded for a short sale.

Looking at the over-the-counter symbols: LZAGY, has an earnings announcement in a few days, and TTNP dropped back within its price channel and so failed confirmation.

That left two bull plays, CLB and PHI.

Both signals came within the context of uptrends on the weekly chart, both coincidentally beginning the week of Nov. 5, 2012.

Each has completed one breakout to the upside during the current trend, CLB for 24.6% yield and PHI for a 9.6% yield. Monday's breakouts are the second for each.

Since the start of 2009, around the beginning of the broad markets' recovery from the recession crash, CLB has completed 18 breakouts, and 11 were successful, for an average yield of 7.1%. PHI has completed 16 breakouts, nine of the successful, for an average yield of 5.9%.

Now comes the gotcha.

Adjusting the CLB average yield by its 61.1% success rate gives a score of 4.3%, and the same process applied to PHI's 56.3% success rate gives a score of 3.3%. My minimum acceptable score is 5%. Therefore, these two symbols get voted off the island and lose their chance at fame and glory.

A pity, really. But a rational decision. The yields on each of these are fairly low, and the spread between the yields on successful and unsuccessful signals is unimpressive, 4.3% for CLB and 1.5% for PHI.

Like any trader with limited funds -- and that describes all traders, since we all want more -- I want to put my money where the potential returns are bigger. That's not these two symbols.

I'll add that emotionally, I wanted to do one of these trades. I like the charts, and I like the rating on PHI from a service I subscribe to. That's the value of rules, like the scoring rule I used above. They keep the emotions at bay, and that can only be a benefit for trading.

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

At several points in my analysis I sometimes use the number 68.2%. This comes from statistics and refers to the one standard deviation boundaries, which are expected to contain 68.2% of whatever is being studied. Putting it another way, given an item (a trade or whatever), there is a 68.2% chance that it will appear within those boundaries.

Disclaimer

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.