Wednesday, January 16, 2008

IBD Follow Through Days pt. 1 - follow up & day counts

There has been a good amount of discussion about results of the first part of my study on IBD Follow Through Days. (If you haven't read it you should do so before reading the rest of this post.) Several readers were concerned whether I was getting the count right.

Unfortunately different IBD and O'Neil sources describe the count slightly differently. This makes exact interpretation difficult.

Fortunately, the exact count method matters very little.

One reader informed me that "24 Essential Lessons for Investment Success" appeared to require an increase in volume on Day 1. Although my IBD sources differed on this point, I tested it anyway. The number of 1% Follow Through Days from 12/1971 until today decreased only from 63 to 62 by adding this requirement. The number of successes dropped from 33 to 31 for a 50% win rate. Results were also nearly unchanged when looking at 1.7% Follow Through Days.

Another reader indicated Day 3 Follow Through Days could qualify under some circumstances. Allowing for Day 3 Follow Through Days, the total number increased from 63 to 70. There were 34 winners and 36 losers. Again - no substantial difference.

The remaining studies will be released using the basic assumptions I outlined in the part 1. Due to inconsistencies with IBD, quantifying Follow Through Days is challenging. As I stated before, just because it is challenging does not mean it is not worth it. I will make my best effort to outline my tests and state my results as clearly as possible.

There are still many more issues to deal with and I will get to all of them. I appreciate the feedback of readers so far, and understand your desire to get it right. I will most likely not look at reader suggested scenarios again until I have completed all six parts of the study along with my summation findings as I detailed in the intro post. Hopefully most questions will be answered by then. I will be happy to deal with any outstanding ones at that point.

Regards,
Rob Hanna

1 comment:

Dave M. said...

Rob said.."I will most likely not look at reader suggested scenarios again until I have completed all six parts of the study along with my summation findings as I detailed in the intro post. Hopefully most questions will be answered by then. I will be happy to deal with any outstanding ones at that point.""

Ok, let me be the first to put in a request to have O'Neil's requirement that the FTD have volume that is more than the 50 day average volume, in addition to more volume than the previous day.

This, IMO, makes better sense, since the FTD is a
indicator of a big follow-on buying day a week or so after the bottom day, then that FTD day should also have a lot of volume too, not just merely more than the previous day.