Trading Systems | JAN 2005
Las Vegas Or Los Nasdaq? by Markos Katsanos
Stocks & Commodities V. 23:1 (18-29): Las Vegas Or Los Nasdaq? by Markos Katsanos Have you ever seen a low-priced stock in your watchlist go up by more than 50% in a day and wished that it had been in your portfolio list instead? Here’s a method for picking stocks before they break out. Most traders and market technicians avoid penny stocks. In fact, their stock screening usually includes a filter to eliminate stocks priced at $5 or less. The most common reason cited is that technical analysis does not apply to penny stocks. But is technical analysis really irrelevant where penny stocks are concerned? I decided to investigate. STOCK SELECTION For my research, I compiled a list of 50 stocks priced below $3, all trading on major US exchanges: the NYSE, Nasdaq, or AMEX. I made a note in an Excel spreadsheet of the values, direction, and (where appropriate) divergence of 30 different indicators or statistical metrics, one day before a major breakout. I used indicators with their default values plus two additional time periods. The average breakout of the sample was 150% in the next few days; the minimum considered for this study was 40%. More than half of the indicators were found to have no significant predictive power and, to eliminate unnecessary work, were dropped out halfway through the research. The remaining indicators were evaluated empirically and statistically, and the best were included in a MetaStock system test. Indicator parameters were optimized in further out-of-sample testing. Any recognizable formations and their duration were also noted. The system was then tested on 100 penny stocks.
by Markos Katsanos
Technical Analysis of STOCKS & COMMODITIES
The Traders’ Magazine since 1982
has had over 1,226,237 subscribers from 174 different countries.
37,000 Page Traders’ Archive for $89.99
To continue reading, sign-up for trial access to Traders.com and the S&C Archive — 37,000 pages of trading ideas!
After verifying your email address, you will have limited access to the S&C Archive, as well as access to a Digital Edition of S&C, and access to Traders.com Advantage and Working Money for 30 days.
Not a subscriber to Technical Analysis of
STOCKS & COMMODITIES magazine?
Click
here to subscribe, or request
a trial subscription.
Log-in now to view articles from the S&C Archive.
Your Subscriber ID is located at the top of your magazine label, highlighted here in red.
Your last name can be found on the second line, highlighted here in blue.
*If you have a company name on the label, that can also be used. It will appear below your name on the label.
If you do not have a Subscriber ID on your label, you can find it on your statement or renewal form.
For help locating your Subscriber ID number, please call us at 1-800-832-4642 or send an email to Survey@Traders.com. If sending an email, please include your name and mailing address.