Scanning for Simon Sez Stocks

[Arindam]

I built a scanner based on Quill’s Simon Sez System, which produced this list as possible breakout trades for tomorrow’s market, Sep 16.

OPRT
AZUL
RRGB
CATO
BRY
DBI
AXL
JRVR
CGNT
PSIL
SXC
DAN
TROX
SRI
PARR
SNDX
GES
ADNT
ARWR
CVI
OILT
VPG
FIVN
PXE
CLW
CAL
MUR
MEOH
AMN
MTDR
CRMT
ABM
ALRM
DLTR
ATKR
VC
LEA
ASND
FANG
CACC

For those not familar with Quill’s trading system, its essence is this: “Buy low. Sell high”. Lows are relative to the lookback period , which is Chef’s Choice, and the trend reversal is confirmed when the lookback low is followed (immediately or closely) by a higher close. Sometimes, the reversal is short lived or fails and the low is retested. Sometimes, prices run up for a couple of weeks.

Here are examples of the trade setup.

The bet being made is this. “This security has been over sold, and mean reversion’ will likely kick in.” In other words, this is just a chart-based version of classic, Ben Graham-style, ‘value investing’ that attempts to bring some discipline to “Buying the Dip”.

Whether you call it '‘investing’, ‘trading’, or ‘speculating’, it’s all just using some sort of present-day information to make bets about future outcomes. If your process is solid, you will make money. If not, you lose. Your decision process has to answer three questions:
What?
When?
How much?

Quill’s Simon Sez method says nothing about What? That’s up to you to choose which markets you track and trade. His method also says nothing about How much?, which is a matter of sizing positions so they are appropriate to your account size and tolerance for risk. But his method can do a good job of saying when to buy and when to sell or when to stand aside.

Do your Due Diligence.

Post Script. Have no idea whether tomorrow’s market will be up or down, though futures seem to be trending upward in tonight’s pre-market. On the basis of funnymentals --mostly analysts’ forecasts about future earnings-- and some guesses about which charts looked best, decided to do a basket trade on the following, meaning, fractional shares and roughly equally-sized bets. A couple weeks of repeating this same process daily should discover whether the gig is viable.

[Quillnpenn]

Went through the list and if you were to follow the Simon Sez rules, you would have an excellent bank account with patience and disclipine Using the below chart of PSIL, we use the frown face to SELL and the smiley face to BUY.

At times, you have to drag the chart to the left until you see faces on the chart.

[Arindam]

Quill,

Thanks for jumping in with comments on when to sell, which is always the hardest part of any investment or trade. Finding stuff to buy is easy. It’s getting out when things aren’t working out as one hoped that’s hard to do well. But just following the signals on the chart, instead of arguing with them, is what needs to be done.

Charlie

[Arindam]

Quill,

I shoulda followed my own advice and just trusted Simon to have gotten the timing correct. But as I mentioned earlier in a PM, yesterday I panicked out of 5 of my 16 buys, 3 of which would have made me money today.

Of the 11 positions I did keep, 2 were losers today (and now sold). But the other 9 are offering serious gains for a (so far) one-day gig. And this is on a day when the “broad market” is mostly flat while traders wait for tomorrow’s Fed announcement.

Reminder to anyone who might be following this thread. I did the buys in factional shares to keep the positions roughly equally-sized. That’s how Linda Raschke sizes her positions, and she’s one of the world’s best traders.

Charlie

Post Script. When to take windfall profits is something I need to set myself rules for. Yeah, yeah. The customary mantra is “Cut losses. Let winners ride”. But that’s just not who I am. I’m a Chicken Little trader who hates uncertainty. If a position is losing, I cut it fast for fear it will get worse. But if a position is gaining in a manner I think is unsustainable, I also want to cut it fast before that gain melts away. So I sold DBI just now for a gain of 11.53% for a holding-period of roughly 24 hours.

I didn’t catch the intra-day high. But I did get out 8 cents higher than the close, vindicating my instinct to grab the profit while it was still a profit. And I look at that gain this way. If the long-term average offered by stocks is around 10%, and Buffet on more than one occasion has projected that 8% per year is a reasonable expectation, then short-term gains in excess of that could be grabbed and the money furloughed for the rest of the year for it having done its job.

For sure, risk-adjusted returns don’t spend any better at the grocery store or gas pump than absolute returns, but they let one sleep easier at night as well as put this investing/trading stuff into perspective. If one has 'Enough", and knows that one has “Enough”, why chase after ‘More’? When I was younger and markets were a lot easier, I took on a lot of risk, because I wanted to build my account. Now --short of a war that comes to our shores-- this investing/trading stuff is just an affordable hobby, about the same as fly fishing done catch-and-release. What matter to me is execution of a plan, not more spendable income.

[Arindam]

Quill,

Ran a Simon scan on the RUS 3k. These five have roughly the same ‘coming off a bottom’ pattern: OKTA, AAP SRPT, OXY, DEV, HI. Most are responding to oil recovering.

Haven’t yet pulled financials. Haven’t yet decided whether to stand aside tomorrow as traders go crazy over whatever Powell says (or doesn’t).

A Simon scan run on the 480 ADRs that trade >$2 and on >50k shares turned up three more tickers: an energy stock (GTE), an ed stock (TAL), and a techie (MBLY).

MBLY has a good story, but its chart is worrisome. I trust dogis to be
highly reliable signals for trend change. Today’s price action for GTE resulted in a standoff between buyers and sellers as well as being a gap up, and another trustworthy rule of thumb is that “Gaps get filled.” Also, today’s volume was underwhelming. Therefore, I’d expect prices for GTE to retrace tomorrow.

TAL, OTOH, I’d be willing to make a bet on, because it seems to have the combo of strong enough financials, strong enough prospects, and strong enough chart that makes for a low-risk entry.

Standard Disclaimers to anyone who might have stumbled onto this thread. Nothing I’ve written should be construed as investment advice. Do your Due Diligence.

Charlie

Post Script. TAL moved up today, Sep 19, just as Simon predicted two days ago that it would.