Of 482 large-cap stocks and exchange-traded funds in my analytical universe, 14 broke beyond their 20-day price channels, 13 to the upside and one to the downside. None survived initial screening.
As an alternative, I looked at all stocks in my analytical universe, screening them for a price of $30 or greater, average volume of 3 million shares a day or greater, implied volatility in the 50th percentile or higher of one-year range and distance from an earnings announcement. Two symbols met the criteria.
There is one prospect for a trade coinciding with an earnings announcements.
Monday, May 30, is a holiday in the United States. I shall do further analysis on Tuesday, May 31.
The next earnings season will begin on July 11 and last for six weeks, through Aug. 19.
by Parag Khanna
Potential trades without signals
Two symbols met the volume, price and implied volatility criteria: MON, which I already hold, and GDXJ, which I don't hold. I shall analyze GDXJ further.
The dates are those of the events, all of them earns announcements. Events prior to the opening bell are marked "am", during the trading day "mid", and after the closing bell "pm".
KORS has sufficiently high implied volatility to qualify for further analysis. However, open interest on its options grid is too low on key strike prices on the call side. The symbol will meet my criteria for a full analysis if open interest improves and implied volatility continues at its present level or higher.
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 27, 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 firstname.lastname@example.org.
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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.
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