Thursday, June 21, 2007

Momentum algorithm

I've tested a simple momentum algorithm to see if it could offer better potential than rigorous technical analysis. Guess what, it consitantly outperforms my analysis! This leads me to two conclusions, either my technical analysis is poorly done, or simply momentum criteria are the best analysis. The latter could be true since ultimately all analysis enters on strength after a period of weakness.

The criteria for my momentum analysis is:
Half year relative strength greater than 70%
100 * (365.25 / 135 * ((Current Price - 135SMA) / 135SMA)) > 70
Period of weakness, monthly gain less than 10%
100 * (Yesterdays Price - Month Ago Price) / Month Ago Price < 10
Signs of strength
Previous three days of weakness
Volume traded > 10,000

This criteria yields these stocks:
BPHX, BLUEPHOENIX SOLUT (Google Yahoo Earnings Chart
GMO, IDAHO GEN MINES I (Google Yahoo Earnings Chart
JADE, LJ INTL INC (Google Yahoo Earnings Chart
SXCI, SYSTEMS XCELLENCE (Google Yahoo Earnings Chart
TGE, TGC IND INC (Google Yahoo Earnings Chart

Let's see how they do after two weeks, shall we?

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