The Setup comes around again

"Almost a sure thing" -- The Naz Comp was down today for the fourth consecutive day. This has happened nine times this past year, last time on July 11th. Buying TQQQ, TNA, UPRO or most any ETF on the Nasdaq, RUT or SPX, on the next day's open (that's tomorrow's open) and selling on the first up day (usually the same day as the buy) has been profitable 89 percent of the time on nine trades this past year. Even SPY and QQQ have made money this year on this setup, just not as much as the leveraged ETFs. TQQQ is up 28 percent on the nine trades in the last year, TNA is up 41 percent and UPRO is up 17 percent. Total time in the market is slightly more than one day on each trade -- approximately 12 or 13 days total for the nine trades. And these ETFs are not alone: AAPL up 18 percent this year on this setup, PCLN also 18 percent, AMZN up 16.8 percent; nine of current top-ten stocks in my nifty-fifty list have been profitable on the trades in the past year. This is about as good as it gets for this year but if the market goes down tomorrow it's even better -- five consecutive days down on the Naz Comp is an ETF setup that's 100 percent profitable for the past year. There, having laid all this out again, it'll probably be different this time. Good luck and good trading.

Dio, Nice catch. It may be likely but less likely than you imply. I like to look at much larger sample sizes than 1 year. Running it all the way back to 1990 on SPY,IWM,QQQ, and DIA (It starts when data starts for each symbol). There have been 335 total occurrences. 68% winners. Avg Win/Avg Loss 1.08 and Avg Profit To Drawdown of .3. I think in the long run you will find those performance numbers a little more realistic. Keep in mind that is with zero context thrown in. SL

"Almost a sure thing" --

The Naz Comp was down today for the fourth consecutive day. This has happened nine times this past year, last time on July 11th.

Buying TQQQ, TNA, UPRO or most any ETF on the Nasdaq, RUT or SPX, on the next day's open (that's tomorrow's open) and selling on the first up day (usually the same day as the buy) has been profitable 89 percent of the time on nine trades this past year. Even SPY and QQQ have made money this year on this setup, just not as much as the leveraged ETFs. TQQQ is up 28 percent on the nine trades in the last year, TNA is up 41 percent and UPRO is up 17 percent. Total time in the market is slightly more than one day on each trade -- approximately 12 or 13 days total for the nine trades.

And these ETFs are not alone: AAPL up 18 percent this year on this setup, PCLN also 18 percent, AMZN up 16.8 percent; nine of current top-ten stocks in my nifty-fifty list have been profitable on the trades in the past year.

This is about as good as it gets for this year but if the market goes down tomorrow it's even better -- five consecutive days down on the Naz Comp is an ETF setup that's 100 percent profitable for the past year.

There, having laid all this out again, it'll probably be different this time.

Good luck and good trading.

thanks for that post, i am not going to argue with these odds 89% and 100%.this type of analysis coupled with sensible stoploss points beats alot of fancy TA,[ which usually leaves one with a with a question mark and several possibilities.]

i will look for and trade this setup from now on. THANKS.

pisces.

Perhaps it is about time those statistics to revert to the mean, I have my trader's sixth sense telling me one more gap down and a test of 200 dma coming before a reversal...

thanks for that post, i am not going to argue with these odds 89% and 100%.this type of analysis coupled with sensible stoploss points beats alot of fancy TA,[ which usually leaves one with a with a question mark and several possibilities.]

i will look for and trade this setup from now on. THANKS.

pisces.

Pisces,

I'm am not arguing that this strategy may beat other forms of TA but would you really put your hard earned money to work on a sample
size of 9 without researching further?

SL

Perhaps it is about time those statistics to revert to the mean, I have my trader's sixth sense telling me one more gap down and a test of 200 dma coming before a reversal...

It's settled then. Gap down to the 200 DMA and up we go.

thanks for that post, i am not going to argue with these odds 89% and 100%.this type of analysis coupled with sensible stoploss points beats alot of fancy TA,[ which usually leaves one with a with a question mark and several possibilities.]

i will look for and trade this setup from now on. THANKS.

pisces.

Pisces,

I'm am not arguing that this strategy may beat other forms of TA but would you really put your hard earned money to work on a sample
size of 9 without researching further?

SL

Still learning,

different strokes for different folks,i respect your apprehension. now everybody has a different approach.in over 40 years of trading i never worried about a sample size and i never backtested anything ever. my approach has always been chartpatterns.and yes i put hard earned money at risk on no more than an educated geuss.the market taught me some expensive lessons.but i survived.
i enjoy reading all the posts here and its never to late to learn something new.

getting back to backtesting,i traded 25 years before the PC showed up,so there was no backtesting,the closest thing was"past experience".

the best of luck to you,

pisces.

Perhaps it is about time those statistics to revert to the mean, I have my trader's sixth sense telling me one more gap down and a test of 200 dma coming before a reversal...

An old Wall Street saw: "Buy the first gap, sell the third." Or in our case,
sell the first gap, buy the third.

I'm am not arguing that this strategy may beat other forms of TA but would you really put your hard earned money to work on a sample
size of 9 without researching further?

9 no, but +20 or more based on context of trend, filters etc - yes.

Dio,

Nice catch.

It may be likely but less likely than you imply. I like to look at much larger sample sizes than 1 year.
Running it all the way back to 1990 on SPY,IWM,QQQ, and DIA (It starts when data starts for each
symbol). There have been 335 total occurrences. 68% winners. Avg Win/Avg Loss 1.08 and Avg
Profit To Drawdown of .3. I think in the long run you will find those performance numbers a little
more realistic.

Keep in mind that is with zero context thrown in.

SL

SL,

Forget SPY, IWM, QQQ and DIA. The point here is to make money and the key to making money in the stock market is leverage, leverage, leverage. No one, and I mean, NO TRADER should be wasting time and money trading un-leveraged index ETFs. Got to be agressive and disciplined to make money.

So let's take TQQQ, TNA, and UPRO back to the start of their data.

By my calculations (I'm using a theoretical million dollars for size), TQQQ has had 17 trades on this setup, 82 percent profitable, for a 15 percent return. That's a low return for the entire time span compared to the 28 percent for the past year. What gives? Well, it's largest losing trade is 18.8 percent and it's larlgest drawdown is 25 percent. Nasty. And it was right after the ETF was introduced. A productive endeavor would be to find a stop to guard against that but still there's a high percentage of trades in profits and a decent overall return for the 22 or so days one would be in the trade.

TNA has had 22 trades, 77 percent profitable, for a 56 percent return for the 22 or so days in the trades. The largest draw down was 4.8 percent.

UPRO has had 20 trades since its inception, 75 percent profitable for a 31.8 percent return on 20 or so days in those trades. Largest draw down is 8.6 percent.

Ran QLD because it goes back longer with its 2x-leverage, 35 trades, 71 percent profitable, for a 20.7 percent return on slightly more than 35 days. The big draw down that afflicted TQQQ is here too, 26 percent.

And ran SSO too for more time span, 35 trades, 69 percent profitable, 25.8 percent return, 16 percent draw down.

Leverage. That's where the money is. I'd submit that every test prior to the onset of leveraged index ETFs is pretty much irrelevant. It's time to trade tomorrow's open, not 1990.

Thanks for running these tests though.

Best to you.

P.S. I left out the Dow because...well, because why would anyone want to trade the the Dow? It's a sluggard index, but on the nine trades for the past year DDM was 78 percent profitable for an eight percent return (yes, why would anyone want to trade the Dow?).