Sell In May And Go Away

There is a market saying that one should sell in May and go away. Statistically, May to October period is not a good time to be in the market.

If you look at the STI index, the period from May to October has underperformed the period from October to May.

The probability of win if you buy in May and exit in October is 50%. However there were 5 periods with double digit losses. For $10,000 invested in the beginning of 1988, the account would have shrunk to $4,050.

Entry Date	Entry Price	Exit Date	Exit Price	% Change	Account Value
5/3/1988	968.90	10/3/1988	1023.10	5.59	$10559
5/2/1989	1266.00	10/2/1989	1375.30	8.63	$11470
5/2/1990	1458.80	10/1/1990	1103.40	-24.36	$8676
5/2/1991	1557.20	10/2/1991	1357.00	-12.86	$7560
5/4/1992	1499.00	10/1/1992	1351.00	-9.87	$6814
5/3/1993	1783.60	10/1/1993	2015.30	12.99	$7699
5/3/1994	2296.50	10/3/1994	2334.40	1.65	$7826
5/2/1995	2070.10	10/2/1995	2120.00	2.41	$8015
5/2/1996	2406.20	10/1/1996	2175.70	-9.58	$7247
5/2/1997	2004.30	10/1/1997	1954.80	-2.47	$7068
5/4/1998	1494.98	10/1/1998	938.08	-37.25	$4435
5/3/1999	1892.43	10/1/1999	2021.14	6.8	$4737
5/2/2000	2172.01	10/2/2000	1970.93	-9.26	$4298
5/2/2001	1735.75	10/1/2001	1329.54	-23.4	$3292
5/2/2002	1737.54	10/1/2002	1345.69	-22.55	$2550
5/2/2003	1278.53	10/1/2003	1621.06	26.79	$3233
5/3/2004	1841.39	10/1/2004	1986.96	7.91	$3489
5/3/2005	2146.04	10/3/2005	2302.03	7.27	$3743
5/2/2006	2613.87	10/2/2006	2571.45	-1.62	$3682
5/2/2007	3395.57	10/1/2007	3734.94	9.99	$4050

The picture reverses if you buy in October and exit in May. The probability of win increases to 70%. For $10,000 invested in the beginning of 1988, the account would have grown to $81,283.

Entry Date	Entry Price	Exit Date	Exit Price	% Change	Account Value
10/3/1988	1023.10	5/2/1989	1266.00	23.74	$12374
10/2/1989	1375.30	5/2/1990	1458.80	6.07	$13125
10/1/1990	1103.40	5/2/1991	1557.20	41.13	$18523
10/2/1991	1357.00	5/4/1992	1499.00	10.46	$20461
10/1/1992	1351.00	5/3/1993	1783.60	32.02	$27013
10/1/1993	2015.30	5/3/1994	2296.50	13.95	$30781
10/3/1994	2334.40	5/2/1995	2070.10	-11.32	$27296
10/2/1995	2120.00	5/2/1996	2406.20	13.5	$30982
10/1/1996	2175.70	5/2/1997	2004.30	-7.88	$28540
10/1/1997	1954.80	5/4/1998	1494.98	-23.52	$21828
10/1/1998	938.08	5/3/1999	1892.43	101.73	$44033
10/1/1999	2021.14	5/2/2000	2172.01	7.46	$47318
10/2/2000	1970.93	5/2/2001	1735.75	-11.93	$41673
10/1/2001	1329.54	5/2/2002	1737.54	30.69	$54462
10/1/2002	1345.69	5/2/2003	1278.53	-4.99	$51744
10/1/2003	1621.06	5/3/2004	1841.39	13.59	$58776
10/1/2004	1986.96	5/3/2005	2146.04	8.01	$63484
10/3/2005	2302.03	5/2/2006	2613.87	13.55	$72086
10/2/2006	2571.45	5/2/2007	3395.57	32.05	$95190
10/1/2007	3734.94	Open	Open	-14.61	$81283

SVAPO Case Study - Synear Food

This is the application of SVAPO indicator on Synear Food. The simple trading rules can be found in my earlier post on SVAPO Indicator

The trading record is given below:

Entry Date	Entry Price	Exit Date	Exit Price	% Change	Bars Held	Draw Down %	Max Gain %	Bars Held
1/31/2007	1.8	2/5/2007	1.96	8.89	3	0	8.8889	3
2/14/2007	2.1	2/21/2007	2.02	-3.81	3	-8.0952	0.9524	3
2/22/2007	2.12	2/27/2007	2.3	8.49	3	-0.4717	8.4906	3
3/8/2007	1.75	3/13/2007	1.86	6.29	3	-1.1429	6.8571	3
3/20/2007	1.79	3/23/2007	1.94	8.38	3	0	11.7318	3
3/29/2007	1.91	4/3/2007	1.97	3.14	3	-0.5236	6.8063	3
4/25/2007	1.89	4/30/2007	1.9	0.53	3	0	4.7619	3
6/4/2007	1.76	6/7/2007	1.9	7.95	3	0	9.6591	3
6/27/2007	1.85	7/2/2007	1.81	-2.16	3	-3.7838	1.6216	3
8/21/2007	1.65	8/24/2007	1.68	1.82	3	-7.2727	2.4242	3
9/26/2007	1.62	10/1/2007	2.11	30.25	3	0	30.2469	3
11/15/2007	1.95	11/20/2007	1.7	-12.82	3	-12.8205	0	3
11/23/2007	1.65	11/28/2007	1.74	5.45	3	-4.8485	5.4545	3
12/19/2007	1.58	12/26/2007	1.63	3.16	3	-5.0633	3.1646	3
1/15/2008	1.5	1/18/2008	1.35	-10	3	-14	0.6667	3
1/22/2008	1.15	1/25/2008	1.21	5.22	3	-14.7826	5.2174	3
1/25/2008	1.21	1/30/2008	1.21	0	3	-2.4793	9.0909	3
2/6/2008	1.07	2/13/2008	1.07	0	3	-5.6075	4.6729	3
2/15/2008	1.01	2/20/2008	1.15	13.86	3	-0.9901	21.7822	3
2/29/2008	0.62	3/5/2008	0.67	8.06	3	-0.8065	11.2903	3
3/6/2008	0.645	3/11/2008	0.515	-20.16	3	-21.7054	1.5504	3

There were a total of 21 trades with 14 winners and 7 losers.

SVAPO Metastock Code

There is some problem when I try to paste the metastock code into the blog site. Some of the characters went missing. So I am posting the screenshot of the metastock formula.

You will need to do some typing to see this indicator in action.

SVAPO Indicator On Yanlord

SVAPO is an indicator presented by Sylvain Vervoort in the Nov 07 issue of the Stocks & Commodities magazine.

This indicator combines price and volume information into a Short-Term Volume And Price Oscillator.

The Metastock code for the indicator is given below:

{calculate the heikin ashi closing average haCl and get the input variables}

haO:=(Ref((O+H+L+C)/4,-1) + PREV)/2;

haCl:=((O+H+L+C)/4+haO+Max((O+H+L+C)/4,Max(H,haO))+Min((O+H+L+C)/4,Min(L,haO)))/4;

period:= Input("SVAPO period :", 2, 20, 8);

cutoff:= Input("Minimum %o price change :",0,10,1);

{Inputs for standard deviation bands}

devH:= Input("Standard Deviation High :", 0.1, 5, 1.5);

devL:= Input("Standard Deviation Low :", 0.1, 5, 1.3);

stdevper:= Input("Standard Deviation Period :", 1, 200, 100);

{Smooth HaCl closing price}

haC:=Tema(haCl,period/1.6);

{Medium term MA of Volume to limit extremes and division factor}

vave:=Ref(Mov(V,period*5,S),-1);

vmax:=vave*2;

vc:=If(V(Ref(haC,-1)*(1+cutoff/1000)) AND Alert(vtr>=Ref(vtr,-1),2), vc, If(haC<(Ref(haC,-1)*(1-cutoff/1000)) AND Alert(vtr>Ref(vtr,-1),2),-vc,0)),period)/(vave+1),period);

devH*Stdev(SVAPO,stdevper);

-devL*Stdev(SVAPO,stdevper);

zeroref:=0;

zeroref;

SVAPO;


The highlights of this indicator are as follows:

1. In an uptrend market, price and volume are moving up. When calculating the oscillator, volume will be added


2. In a downtrend market, price goes down while volume goes up. When calculating the oscillator, volume will be subtracted.


3. When volume is moving down and price is in consolidation phase moving in either direction, volume will not be used to calculate the oscillator.


4. Additional price and volume smoothing is done using triple exponential moving average (TEMA).
   

Let’s look at Yanlord as a case study.

Entry Rules :

1. SVAPO (Red line) must be below the lower boundary (Green line)


2. Today’s SVAPO must be greater than yesterday’s SVAPO


3. If condition 1 and 2 are true, buy at tomorrow’s opening price.

Exit Rules:

1. Exit the trade after 3 days.

The trading record is as follows:

Entry Date	Entry Price	Exit Date	Exit Price	% Change	Bars Held	Draw Down %	Max Gain %
11/23/2006	1.73	11/28/2006	1.95	12.72	3	0	19.0751
1/10/2007	2.46	1/15/2007	2.43	-1.22	3	-3.6585	0
1/24/2007	2.36	1/29/2007	2.19	-7.2	3	-8.8983	0.8475
2/14/2007	2.08	2/21/2007	2.13	2.4	3	0	3.8462
3/6/2007	1.78	3/9/2007	1.95	9.55	3	0	9.5506
3/9/2007	1.95	3/14/2007	2	2.56	3	-2.5641	6.1538
4/26/2007	2.34	5/2/2007	2.38	1.71	3	-1.7094	2.1368
7/31/2007	3.24	8/3/2007	3.26	0.62	3	-1.8519	3.7037
8/3/2007	3.26	8/8/2007	3.24	-0.61	3	-2.454	4.2945
8/21/2007	2.79	8/24/2007	2.94	5.38	3	0	7.5269
9/21/2007	3.2	9/26/2007	3.22	0.62	3	-2.5	1.25
10/19/2007	3.7	10/24/2007	3.62	-2.16	3	-9.1892	0
11/15/2007	3.7	11/20/2007	3.42	-7.57	3	-7.5676	1.0811
1/11/2008	2.77	1/16/2008	2.65	-4.33	3	-6.4982	1.083
1/25/2008	2.48	1/30/2008	2.6	4.84	3	0	7.6613
3/11/2008	2.08	3/14/2008	1.95	-6.25	3	-9.1346	9.6154
3/25/2008	1.8	3/28/2008	2.28	26.67	3	0	27.7778
4/23/2008	2.31	Open	Open	4.33	1	-1.7316	6.4935

There are a total of 18 trades with 11 winners and 7 losers.

STI Update

STI index broke closed at 3171 yesterday. It managed to break through 3200 but it could not stay above it.



Looking at the chart, the index needs to stay above 3130 which is the support line. This is also where the neckline resides. The index tried to break out of this neckline in early Apr but failed. It only managed to break this level after a pullback to 3035.

The index has moved from a low of 2745 on 17 Mar 08 to a high of 3181 on 7 Apr 08. Based on Fibonacci Retracement, the objective point for STI is at 3471.

Dow Inverse Head And Shoulder

Dow broke through 12800 points on Friday boosted by better earnings result from Google which rose about 20%.



The Dow chart is looking like a breakout of an inverse head and shoulder pattern. During the beginning of the week, it looked as if the right shoulder would not be formed. However due to better earning results, the index managed to claw back and break out of the 12800 level which is where the neckline resides (point C).

The price objective based on this pattern is (B-A+C) which gives an objective level of 13950.

Dow And VIX Update

On Friday's trading session, the Dow Industrial Average closed down 256.56 points at 12325.42. General Electric shocked investors with lower-than expected earnings and a profit warning that wiped $46.9 billion off its value and sent the overall market slumping.

The VIX closed at 23.46.




If you look at the VIX chart, you can draw a trend line ("Blue Line") connecting the bottom formed on Oct 07, Nov 07 and Apr 08 respectively. These 3 points marked the beginning of significant drop in the Dow Industrial Average ("Red Line").


The VIX is not painting a good picture for trading next week. So do trade with care.

COSCO Trend Score Case Study 2

Based on an initial investment of $10,000 dollars, your account would have grown to $130,000 in 4 years.

Entry Date	Entry Price	Exit Date	Exit Price	% Change	Account
1/2/2004	0.615	3/9/2004	0.88	43.09	$14309
3/11/2004	0.89	4/27/2004	0.85	-4.49	$13667
5/28/2004	0.8	6/4/2004	0.755	-5.63	$12897
6/7/2004	0.765	6/15/2004	0.745	-2.61	$12560
6/30/2004	0.775	8/11/2004	0.855	10.32	$13857
9/7/2004	0.835	11/2/2004	1.04	24.55	$17259
11/8/2004	1.11	12/7/2004	1.13	1.8	$17569
12/24/2004	1.16	5/3/2005	1.75	50.86	$26505
5/5/2005	1.8	5/18/2005	1.69	-6.11	$24885
6/1/2005	1.81	6/3/2005	1.79	-1.1	$24612
6/6/2005	1.82	8/26/2005	2.38	30.77	$32185
9/5/2005	2.56	10/3/2005	2.55	-0.39	$32059
11/17/2005	2.27	11/29/2005	2.31	1.76	$32623
1/6/2006	2.32	1/24/2006	2.31	-0.43	$32483
3/16/2006	1.22	3/23/2006	1.2	-1.64	$31950
3/24/2006	1.23	4/10/2006	1.21	-1.63	$31430
4/11/2006	1.24	4/13/2006	1.22	-1.61	$30924
4/17/2006	1.22	5/16/2006	1.33	9.02	$33713
7/5/2006	1.27	9/12/2006	1.52	19.69	$40351
9/15/2006	1.57	12/19/2006	2.1	33.76	$53974
12/29/2006	2.32	3/1/2007	2.73	17.67	$63511
3/21/2007	2.91	4/17/2007	2.88	-1.03	$62857
4/19/2007	2.9	4/20/2007	2.85	-1.72	$61775
4/27/2007	2.9	5/2/2007	2.83	-2.41	$60287
6/4/2007	2.74	8/8/2007	4.8	75.18	$105610
9/3/2007	5.05	11/13/2007	6.8	34.65	$142204
12/12/2007	6.55	12/14/2007	6.05	-7.63	$131354
3/31/2008	3.73	Open	Open	-0.8	$130303

This result is due to the super bull run that we had for the past 4 years.

COSCO Trend Score Indicator Case Study

This is a case study of trading COSCO based on Trend Score Indicator.

For more information on Trend Score indicator, please refer to my earlier post http://stockstudent.blogspot.com/2008/03/trend-score.html

I have assumed the following trading rules.

Entry (For long trades)
1. Trend Score for today is greater than 5.
2. Trend Score yesterday is less than or equal to 5.
3. If condition 1 and 2 are true, buy at the market open on the next trading day

Exit (For long trades)
1. Trend Score for today is less than 0
2. If condition 1 is true, sell at the market open on the next trading day.

The rules are the same as those used for YangZiJiang case study.

Trading record is as follows:

Entry Date	Entry Price	Exit Date	Exit Price	% Change	Draw Down %	Max Gain %	Bars Held
1/2/2004	0.615	3/9/2004	0.88	43.09	0	54.4715	44
3/11/2004	0.89	4/27/2004	0.85	-4.49	-5.0562	30.3371	32
5/28/2004	0.8	6/4/2004	0.755	-5.63	-7.5	0.625	4
6/7/2004	0.765	6/15/2004	0.745	-2.61	-2.6144	2.6144	6
6/30/2004	0.775	8/11/2004	0.855	10.32	-1.9355	16.129	29
9/7/2004	0.835	11/2/2004	1.04	24.55	0	34.1317	40
11/8/2004	1.11	12/7/2004	1.13	1.8	-1.8018	9.9099	19
12/24/2004	1.16	5/3/2005	1.75	50.86	-1.7241	58.6207	86
5/5/2005	1.8	5/18/2005	1.69	-6.11	-6.6667	3.3333	9
6/1/2005	1.81	6/3/2005	1.79	-1.1	-2.7624	0.5525	2
6/6/2005	1.82	8/26/2005	2.38	30.77	-0.5495	42.8571	54
9/5/2005	2.56	10/3/2005	2.55	-0.39	-1.5625	3.125	19
11/17/2005	2.27	11/29/2005	2.31	1.76	-3.5242	5.2863	8
1/6/2006	2.32	1/24/2006	2.31	-0.43	-51.2931	2.1552	12
3/16/2006	1.22	3/23/2006	1.2	-1.64	-5.7377	2.459	5
3/24/2006	1.23	4/10/2006	1.21	-1.63	-3.252	3.252	11
4/11/2006	1.24	4/13/2006	1.22	-1.61	-2.4194	0	2
4/17/2006	1.22	5/16/2006	1.33	9.02	0	21.3115	19
7/5/2006	1.27	9/12/2006	1.52	19.69	-2.3622	28.3465	48
9/15/2006	1.57	12/19/2006	2.1	33.76	0	46.4968	62
12/29/2006	2.32	3/1/2007	2.73	17.67	-2.1552	30.1724	40
3/21/2007	2.91	4/17/2007	2.88	-1.03	-3.7801	1.7182	18
4/19/2007	2.9	4/20/2007	2.85	-1.72	-4.8276	0.6897	1
4/27/2007	2.9	5/2/2007	2.83	-2.41	-2.4138	0.3448	2
6/4/2007	2.74	8/8/2007	4.8	75.18	-1.0949	111.6788	47
9/3/2007	5.05	11/13/2007	6.8	34.65	-2.1782	62.3762	50
12/12/2007	6.55	12/14/2007	6.05	-7.63	-9.1603	0	2
3/31/2008	3.73	Open	Open	-0.8	-4.5576	5.0938	6

The winning probability is 46%. The average gain for the winning trade is 27% and average loss for the losing trade is 2.6%. The expectation is therefore positive.

STI Turtle Trading Breakout

Dow closed at 12609.42 on Friday trading session. For the week ending 4 Apr 08, Dow was up 393 points.

STI closed at 3155.56, up 123 points for the week. If you look at the weekly chart for the STI, you can see that it is the 2^nd consecutive “White” candle. Both “White” candles closed near the high which is a bullish sign.

The STI also broke through its 20 day high on 2 Apr 08. If you are a breakout player, then you will look to buy at this level.

Let’s take a look at a simple breakout system called Turtle Trading System. This system was popularized by Richard Donchian. It uses 20 day breakout as an entry rule for both long and short trades. The duration of the test is from Apr 1998 to 4 Apr 2008.

Let’s assume the following breakout rules:

Entry

1. Today’s Close must be greater than the High of the previous 20 trading day
2. If condition 1 is true, buy at the opening price on the next trading day.

Exit

1. Today’s Close must be less than the Low of the previous 20 trading day
2. If condition 1 is true, sell at the opening price on the next trading day.

The trading result is shown below:

Winning trades:

Entry Date	Entry Price	Exit Date	Exit Price	Change %	Draw Down %	Max Gain %
10/13/1998	1,019.80	2/4/1999	1,371.46	34.48	-3.3359	55.0402
3/5/1999	1,441.85	7/23/1999	2,066.30	43.31	-0.4466	55.8713
11/12/1999	2,155.49	1/20/2000	2,265.25	5.09	0	19.8308
10/18/2001	1,420.57	4/10/2002	1,741.56	22.6	-6.8648	30.1583
5/30/2003	1,344.08	9/11/2003	1,561.99	16.21	-0.0699	22.1825
9/25/2003	1,618.40	11/12/2003	1,703.51	5.26	-0.2713	11.5268
12/31/2003	1,765.85	3/12/2004	1,821.54	3.15	-0.0753	8.3291
7/1/2004	1,840.31	10/15/2004	1,945.21	5.7	-0.545	9.8679
1/4/2005	2,069.12	4/19/2005	2,120.51	2.48	-0.3446	5.9044
5/13/2005	2,175.59	10/20/2005	2,239.72	2.95	-1.7471	10.3034
11/21/2005	2,297.42	5/17/2006	2,525.14	9.91	-1.3728	16.0576
7/3/2006	2,435.35	3/6/2007	2,997.61	23.09	-4.7763	36.1702
4/5/2007	3,332.39	7/30/2007	3,467.36	4.05	-1.2336	10.6887
9/6/2007	3,374.01	11/12/2007	3,531.23	4.66	-0.1603	15.772
4/3/2008	3,124.61	Open	Open	0.99	-0.1421	1.6392
			Average	12.262	-1.425706667	20.62282667

Losing trades:

Entry Date	Entry Price	Exit Date	Exit Price	Change %	Draw Down %	Max Gain %
3/28/2000	2,220.32	4/18/2000	2,057.69	-7.32	-10.7656	0.6454
4/8/2003	1,322.66	4/25/2003	1,233.67	-6.73	-6.7281	0.9413
11/2/2000	2,035.93	12/22/2000	1,906.38	-6.36	-7.0823	1.6474
1/14/2003	1,386.21	1/30/2003	1,309.24	-5.55	-6.0135	1.45
5/2/2001	1,735.75	7/9/2001	1,647.62	-5.08	-5.6834	1.0716
4/12/2004	1,902.82	4/30/2004	1,810.19	-4.87	-4.868	0.1813
2/1/2001	1,984.43	2/28/2001	1,914.77	-3.51	-3.5103	0.8012
7/20/2000	2,137.35	9/13/2000	2,081.77	-2.6	-6.021	3.9198
11/18/2004	2,048.25	12/10/2004	2,006.12	-2.06	-2.3977	1.3836
			Average	-4.8977778	-5.896655556	1.337955556

There were a total of 24 trades with 15 winners and 9 losers. The average win is 12.26% and average loss is 4.89%.