Of 479 large-cap stocks and exchange-traded funds in my analytical universe, 14 broke beyond their 20-day price channels, all 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.
Two symbols with trading signals having low odds of success survived initial screening, both having broken out to the downside. Low-odds symbols are candidates for non-directional trades.
There are no prospects for trades coinciding with earnings announcements.
I shall do further analysis on Friday, May 20.
The present earnings season conclude on Friday, May 20. The next earnings season will begin on July 11 and last for six weeks, through Aug. 19.
by John Tamny
Trading signal survivors
All three prospects have implied volatility below my standards. I require IV in the 60th percentile of its most recent range. BIIB is five points shy of that level, and the other two far below.
If the implied volatility level improves after the opening bell on Friday, I shall post an analysis and possibly enter a position. I'll discuss my final decision in the Agenda post after the opening bell.
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 and 2) the absence of an earnings announcement within the lifespan of the like options series I would trade.
I defer until the day of a possible trade a final screen for implied volatility in the 60th percentile or greater of its most recent range.
-- Tim Bovee, Portland, Oregon, May 19, 2016
Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.
I can be reached via comments on Private Trader posts or by email at email@example.com.
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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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