System Design  |  DEC 2002

Developing Hot Zones by Massimiliano Scorpio

Developing Hot Zones by Massimiliano Scorpio Can you forecast a bar’s close from its open? This technique is helpful in trading recently introduced tradables that don’t have historical charts yet, such as single-stock futures. In the December 2001 STOCKS & COMMODITIES, I demonstrated a simple method that uses a statistical indicator to help identify profitable patterns. Here, I have taken the method one step further: I’ve analyzed the behavior of each bar and the relationship between the open and close. If the market is showing a specific pattern, is there any way to forecast the close from the open’s position in the bar? I used the key reversal up day (see Figure 1) for the pattern to see whether such a forecast was possible.

by Massimiliano Scorpio