Thursday, June 21, 2007

Chasing bugs... The programming kind

This morning post was flawed. Any keen reader would have pointed out that the main criteria for picking stocks is having 3 days weakness. Many stocks in the scan did exhibit this trait. After fixing the problem, no stocks showed up in the scan. I wonder that this means in the market?

Since no stocks showed up in the scan, I wondered which stocks were doing well. I created a scan for stocks with 3 days of strength. This returned lots of stocks. I filtered out all stocks with a slow stachostic pk value of more than 70 since these stocks may not have much upside potential. I also filtered out stocks when the pk value is not above the pd value. There were still lots of stocks. I then filtered out all stocks with a 4% gain in a single day over the past 10 days. These stocks are likely to exhibit correction in todays markets due to uncertainty and profit taking.

There were still lots of stocks in the scan. I decided to only accept those stocks with a 10 or 20 day efficiency ratio greater than 0.3 The efficiency ratio is a measure of how well a stock trends in a specific direction. A perfect ratio of 1 means the stock moves the same amount over a given number of days.

These were the stocks in the scan:
BTA, BR LONG TRM MUNI (Google Yahoo Earnings Chart
CBAK, CHINA BAK BATTERY (Google Yahoo Earnings Chart
CHR, CONVERIUM HLDG AD (Google Yahoo Earnings Chart
FD, FEDERATED DEPT ST (Google Yahoo Earnings Chart
HBG, HUB INTL LTD (Google Yahoo Earnings Chart
IIF, MS INDIA INV FD (Google Yahoo Earnings Chart
KOR, KOOR INDUSTRIES L (Google Yahoo Earnings Chart
MAM, MAINE & MARITIMES (Google Yahoo Earnings Chart
PRFT, PERFICIENT INC (Google Yahoo Earnings Chart
SDXC, SWITCH & DATA FAC (Google Yahoo Earnings Chart
VSL, VIDESH SANCHAR NE (Google Yahoo Earnings Chart

After correcting the algorithm in this mornings post, this evenings scan reveals these stocks:
FDP, FRESH DEL MONTE P (Google Yahoo Earnings Chart
PRGX, PRG-SCHULTZ INTL (Google Yahoo Earnings Chart
SDA, SADIA S.A. (Google Yahoo Earnings Chart

It's interesting to examine the results of the reuters contrarian scan:
AOB
IEHC
MTH
NVR

Most of these stocks exhibit three days weakness and a sign of strength. This fits the form of the above scan, but with a different ranking system. I don't have a good data set of changing stock indicators such as EPS or earnings growth. Reuters does and uses that criteria in the ranking instead of an relative strength ranking.

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