Of 470 large-cap stocks and exchange-traded funds in my analytical universe, six broke beyond their 20-day price channels, five to the upside and one to the downside.
One symbol giving a trading signal with low odds of success survived initial screening, having broken out to the upside.
There are no prospects for trades coinciding with earnings announcements that I shall consider. I looked at five prospects for Wednesday early because of a scheduling conflict: DAL, PACW, PGR, PNC and WFC. All failed to meet my implied volatility standards and so were rejected for trading.
I shall do no further analysis on Wednesday, April 13 because of a scheduling conflict that will take me away from my desk.
Earnings season began April 11. The higher pace of announcements will continue for about four weeks.
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Trading signal survivors
RDS series A has low open interest at key strike prices on its options grid and also has low implied volatility, in the 25th percentile of its recent range. It is therefore disqualified from trading. I shall be away from my trading desk most of Wednesday's session and shall be unable to see if the flaws persist, so my decision to pass on full analysis and a potential trade are final.
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 60th 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.
-- Tim Bovee, Portland, Oregon, April 12, 2016
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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