Volume Alert Trigger progress

[Mike]

The team has been working on the real-time Volume Trigger Alert. The alpha-test implementation is stable and producing useful results. I have bought four of these alerts: ATHL, EMES, CLR, and AVGO and so far they are all in positive territory. There remains much to be done as there are too many alerts early in the day. We received 11 today so far. Pascal has suggested an approach that he has used in his real-time trading system that produces a quality of the alert which essentially predicts whether the alert conditions early in the day will persist into the close based on historical behavior of the stock.

The current screen looks like the screen shot below. The current list of stocks is 74 symbols long which is updated weekly based on screens I run. On one-minute intervals the following occurs for each stock:


1. Intraday volume is extrapolated to end of day volume using a 6th order polynomial function previously developed for this purpose.
2. Price change from yesterday's close is tested for a positive value.
3. Price is tested for nearness to the 50-day moving average with a successful outcome if it is in the range of 0% to +5%.
4. Price is tested for nearness to the 10-day moving average with a successful outcome if it is in the range of 0% to +5%.
5. Extrapolated end of day volume is compared to the largest volume in the prior 10-days that occurred on a down day. A successful outcome is when extrapolated EOD volume exceeds this value.

As soon as all of the conditions are met for a 10-day or 50-day Volume Alert Trigger an email is automatically sent as well as an alert condition is shown on the site. The green background rows in the image below show alert conditions. Today 4 1/2 hours into the trading day there are 8 alerts of varying quality. All alerts are not expected to be acted on, each user needs to do his own due diligence on the opportunity.

Yesterday EMES showed an alert which I bought. Earlier this morning EMES showed another alert which I took the occasion to add to my position, it is now extended. The two columns (Price% above 50DMA and Price% above 10DMA) show the word "Above" to indicate the extended condition. More to follow as we make progress...

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[Riskslayer]

Hi Mike,

This work looks great.

I have been watching EMES for weeks, and passed due to market conditions, its had some quick down moves last month (Jun), and choppiness/weakness in the oil complex generally- a wrong decision in hindsight.

I figured I had missed it after the Tu move. What are your add-on guidelines/rules for adding on Wed? It seemed extended after the 1st 15-20 minutes on Wed - to my eye.

Another Q: For your own portfolio, are about 100% of your buys from this universe of stocks - the weekly scan results (74 for this week)? I sometimes wonder whether I am considering too many names.

Thanks,

Shawn

[Mike]

Hi Mike,

This work looks great.

I have been watching EMES for weeks, and passed due to market conditions, its had some quick down moves last month (Jun), and choppiness/weakness in the oil complex generally- a wrong decision in hindsight.

I figured I had missed it after the Tu move. What are your add-on guidelines/rules for adding on Wed? It seemed extended after the 1st 15-20 minutes on Wed - to my eye.

Another Q: For your own portfolio, are about 100% of your buys from this universe of stocks - the weekly scan results (74 for this week)? I sometimes wonder whether I am considering too many names.

Thanks,

Shawn

Shawn, the universe of stocks for this service is larger than my normal watch list because it is difficult to know beforehand where a volume alert trigger is going to come from. Essentially every stock that I might eventually want to own goes into this service and we let price and volume speak for themselves. If the stock is trading below the 200-day it is taken off the list. The optimum buy point is when a stock nears the bottom of a consolidation by approaching the 50-day moving average or if below comes up through the 50 day and then shows a high volume move up. A continuation buy point occurs when price bounces at or surges upward through the 10-day moving average. High volume is defined by comparing end of day volume with the maximum volume during the prior 10 trading days where the price change was negative. Predicting EOD volume is tricky but the 6th order polynomial extrapolation formula previously developed seems to work well enough particularly when the predicted volume is much greater than the threshold volume.

EMES essentially showed a 10-day volume alert trigger two days in a row at the 10-day moving average. Yesterday its lows were close enough to the 10-day to act early in the day. By 20 minutes into the day I consider it as too far extended. Indeed when the extended condition occurred the volume alert trigger service removed the buy alert. I added early at 114.45 to bring my position up to a full sized position. When I take an initial position at a volume alert trigger buy point it is usually a half sized position. A full position for me is computed by taking the full cash value of my portfolio and dividing by 7, thus I am set up when I am 100% in to have 7 full positions. When the market is working well I will venture onto margin.

My normal watch list is made up of quality stocks that are are close enough to break out of a classic base structure such as a cup with handle, double bottom or flat base. I also put stocks that may break above a 3-weeks tight pattern. 3-weeks tight is a constructive area where large institutions are buying, the give away is that the stock closes each week at nearly the same price. It is possible to buy these when the price moves up above the highs of the pattern. I also will list some quality names that have pulled back to the 50-day moving average. The standard watch list is usually 10 names, sometimes far less.

[barbados11]

Mike, thanks for the update. I find this very interesting but as you mention, the universe is quite large. I look forward to seeing how this pans out. In the mean time can you explain the second and third columns (Supply and LER).

Best regards,

Pablo

[Mike]

Mike, thanks for the update. I find this very interesting but as you mention, the universe is quite large. I look forward to seeing how this pans out. In the mean time can you explain the second and third columns (Supply and LER).

Best regards,

Pablo

Pablo, LER is large effective volume ratio and Supply is Pascal's Supply Indicator that relates to the probability that shareholders will sell their shares. What Pascal has discovered is that stock with small Supply and large LER tend to correlate well with stocks that advance over a longer period of time. Since buying longer term is the focus of my trading I wanted to bring these values into focus for a universe of stocks that have good fundamentals which I find correlates well with longer horizon investing. These columns are experimental at this stage. As an example of how they might be useful PCLN has 0 supply and an LER of 103.6. If PCLN issued a volume alert trigger I would be extra interested.

[barbados11]

Pablo, LER is large effective volume ratio and Supply is Pascal's Supply Indicator that relates to the probability that shareholders will sell their shares. What Pascal has discovered is that stock with small Supply and large LER tend to correlate well with stocks that advance over a longer period of time. Since buying longer term is the focus of my trading I wanted to bring these values into focus for a universe of stocks that have good fundamentals which I find correlates well with longer horizon investing. These columns are experimental at this stage. As an example of how they might be useful PCLN has 0 supply and an LER of 103.6. If PCLN issued a volume alert trigger I would be extra interested.

Mike, Got it. Thank you.

[Harry]

Mike,

Thanks for sharing - count me in! Looking forward to the volume trigger and always love your posts!

Harry