Monday, November 5, 2007

Buy signals for November 3rd

The scan for the previous week resulted with 2 buy signals:

NTWK which was sold 3 weeks ago due to stop loss signal and gained ~30% since, got a new buy signal. This example demonstrates one of the problems with computerized trading system. For the trained eye, the exits signal was a result of a natural and predicted behavior of the bulls who became restless after a 3 weeks rally which yielded ~70%. As a result the stock went down 10.86% to which the system responded with a stop loss signal. Since I'm bound to follow the system I closed my position. A closer look at the volume for the that week confirmed my analysis as it showed that the volume was much lower than the average volume. This tells me the major trend is still bullish. I will try to find a way to take into consideration the analysis above. This is not as simple as it may seem. This might work for NTWK, but running the modified system on different markets may result in a less attractive system (which is usually the case when you try to generalize a rule).

I was able to fine tune the system so it now ignores signal such as the above.

 VGR got a buy signal. Looking at the Twiggs Money Flow indicator shows the stock is being bought for the last two weeks. The stock is currently on the verge of breaking the resistance of 21.8. I intend to buy this stock during the following trading day.

GPX also got a buy signal and I intend to buy it as well.

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