Tuesday, March 23, 2010

Back To Back Outside Days In QQQQ

On Monday QQQQ posted a higher high and a lower low than Friday. This is often referred to as an “outside day”. Interestingly, Friday was also an outside day. Two outside days in a row is quite rare. This was only the 19th time it’s been done since 2000. Looking at performance following the other 18 times shows some compelling results.


These appear to be quite positive implications. They also confirm the December study where I looked at back to back outside days in SPY.

6 comments:

Toptick said...

Two things are interesting:

1) The the order of up or down days doesn't seem to matter.

2) On visual inspection, these instances look like volatility expansions from unusually quiet ranges (small ATR). Usually, increasing volatility associates with increased risk perception (falling prices), but here, in many cases, it is like new energy added to an exhausted rally.

Great work as always. Thanks!

Daniel said...

Yes.

Another unique Rob Hanna slant, sticking to the basics of volume, volatility and price action-- and avoiding the headline numbers that "all eyes are fixed on"...

Personally, that’s one of the dozen or so hypnotizing phrases, from press or Gov't, which immediately causes me to do a protective bit of the exact opposite... while at the same time feeling if my wallet is still there. Like when one gets bumped slightly at a State Fair...

The headline number now is WHICH Index will hit another 52 week high. And HOW ‘overbought’ can the market become?

The analysis Rob did here has to do with probability of gains, given a certain meaningful pattern. It is not a guess at the current fad guessing game. Way to go, Rob, you can think not only outside a box but also outside a sphere, and a trapezoid, and probably other shapes as well!

I know you look at various concepts of ‘stretch’, so I have a research question for you. I don't have research time or facilities so I try only to frame questions. By simple use of the ZigZag feature on the most basic of StockCharts, it is now several eons since the SPY has experienced a 3% drawdown, even on intraday figures (assuming that this simple zigzag metric is accurate). The 3% level has been useful to me in filtering out noise, and I use it only for that; however it sure seems like it’s been an unusually long time. They do frequently show up.

Is this nothing more than the general volatility contraction-- or is it indeed a form of ‘stretch’, which can be compared to historical patterns of the past?

Daniel

Adam Berkowitz said...

i am thankful for this study...

i performed some addtional research on it, added a risk management exit, and then completed a trade netting about 14 NQ points...

thanks again

adam

Rob Hanna said...

Daniel,
Thanks for your input as always.

Toptick & Adam,

Nice to see you guys taking an idea and running with it. Good work.

Alice Thomas said...
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