Of 490 large-cap stocks and exchange-traded funds in my analytical universe, 43 broke beyond their 20-day price channels, one to the upside and 42 to the downside.
One symbol giving a trading signal with high odds of success survived initial screening, having broken out to the downside. High-odds symbols are candidates for directional trades.
No symbols with trading signals having low odds of success survived initial screening. Low-odds symbols are candidates for non-directional trades and time spreads.
There are no prospects for trades coinciding with earnings announcements.
I shall do further analysis on Monday, Dec. 14.
Trading signal survivors
The stocks in my analytical universe all have analyst coverage through the stock-ranking company Zacks Investment Research. Not all of the exchange-traded funds are so covered.
I screen the symbols for historical odds of a profitable signal in the direction of the breakout for the past 12 months.
For symbols whose odds of success are in the top or bottom thirds, suggesting a directional or non-directional trade, respectively, I next screen for 1) suitability of the options grid, including open interest of three figures or greater on the strike prices I would need to use to build a position, 2) implied volatility in the 66th percentile or greater of its 12-month range, and 3) the absence of an earnings announcement within the lifespan of the like options series I would trade. For symbols with odds of success in the bottom third, I also screen for low implied volatility, in the 33rd percentile or below, suggesting a covered call play.
-- Tim Bovee, Portland, Oregon, Dec. 12, 2015
Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.
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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.License
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