All three confirmed the breakouts, but the second phase of analysis this morning shows that none are worth pursuing for a trade. Here's why.
Dice Holdings Inc. (DHX) was a bear signal, with an average volume of 308,000 shares. It has options, but they are too illiquid to meet my minimum requirements. The stock is also liquid enough for short sales of shares. The historical odds of a profitable downside trade, both since early 2009, when the broad markets began recovering from the post-recession crash, and since the present sideways trend began in November 2011, have been less than 50%.
The remaining two symbols were bull signals.
Delek Logistics Partners LLP (DKL) has an average volume of 30,000 shares. It had a strong upside breakout amid an uptrend, and the one prior breakout was profitable. But it's a new stock, having had an IPO in November 2012, and has only issued one quarterly report. There's just not enough history to successfully assess the odds.
Recovery Energy Inc. (RECV) on average trades 11,000 shares. Its upside trades have produced losses more often that not. The most recent upside breakout comes amid a downtrend on the weekly chart, which runs contrary to my preference for trading on the side of the trend.
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 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.
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