StockFetcher Forums · Filter Exchange · Chande and ECO<< >>Post Follow-up
265 posts
msg #81515
Ignore trendscanner
10/21/2009 6:33:15 PM

Iíve been playing with various indicators, looking for combinations that provide opportunities for long positions that net quick and significant returns over a 2 to 5 day period. One of the more interesting and potentially profitable combinations Iíve found involves the Chande Momentum Oscillator (CMO) and Ergodic Candlestick Oscillator (ECO). I havenít seen anything posted using this specific combination of indicators although I did see Emanís Chande bottom filter and that gave me an idea to look at Chande for this purpose.

The concept of this filter is to first find stocks that have made a significant new low, not necessarily in price, although that may be the case, but a new low as indicated by an extreme reading of a money flow indicator. Iím using CMO for that. Second, I want to wait for a condition where the stock has reached some price stability. Iíve looked at several indicators for that purpose. For this particular filter Iím using a new low of ECO to confirm the CMO low.

The basic engine of the filter is:

Chande Momentum Oscillator(20,9) reached new 6 month low within last 3 days
ECO(10,5) reached new 6 week low within last 3 days

Adding various price/volume selectors and selecting for certain conditions, one version of this filter produces the following back test statistics:

There were 54 total stocks entered. Of those, 46 or 85.19% were complete and 8 or 14.81% were open.
Of the 46 completed trades, 34 trades or 73.91%resulted in a net gain.
Your average net change for completed trades was: 6.43%.
The average draw down of your approach was: -2.85%.
The average max profit of your approach was: 9.47%
The Reward/Risk ratio for this approach is: 6.32
Annualized Return on Investment (ROI): 317.58%, the ROI of ^SPX was: 63.53%.

Stop Loss was triggered 0 times or 0.00% of the time.
Stop Profit was triggered 0 times or 0.00% of the time.
Trailing Stop Loss was triggered 0 times or 0.00% of the time.
You held for the maximum period of time (5 days) 46 times or 100.00% of the time.

For the exit criteria, I used a 10% stop loss, no profit stop and simply sold at the end of 5 days. The average 5 day return was 6.5%.

The filter that produced those results is:

/* Chande and ECO*/

close reached new 6 month high within last 2 months
average volume(45) above 70000
volume above 40000
close between 2 and 30
Close-to-open gap above -3 last 20 days
Count(close dropped more than 15%, 20) < 0.5
Chande Momentum Oscillator(20,9) reached new 6 month low within last 3 days
Chande Momentum Oscillator(20,9) above Chande Momentum Oscillator(20,9) 2 days ago
ECO(10,5) reached new 6 week low within last 3 days
weekly rsi(2) < rsi(2)
close has gained less than 4% over last 3 days
draw ECO(10,5)
add column Chande Momentum Oscillator(20,9) {CMO}
add column ECO(10,5) {eco}
add column rsi(2)
add column weekly rsi(2)
sort by column 5 ascending

I started trading some of the hits from this and related versions with small positions last week but havenít made any money yet. Of the 13 hits for this filter in October, only 1 (CBOU) made a large (26%) up move after being identified but I didnít happen to trade that one. This filter had the most success in July after the mid-year pullback. Might need another good pullback to create the best set ups for it.

Although this filter and related ones Iím working on donít provide a holy grail or even a tradable system yet, Iím convinced the conceptual approach is valid and could lead to a tradable method. A number of the stocks that are identified make significant up moves of 20% or more within a week or so after the filter identifies them. But a fair number also make sideways or down moves, so itís not an automatic system. The key is to figure out how to identify those stocks that have reached a solid bottom and are ready to fly versus the ones that are simply pausing before going down further or moving sideways. Will continue to work with it and see if something more consistent develops. As always, suggestions and ideas are welcome.

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