Strategy Session: Fading an Up Move

Strategy Session: Fading an Up Move

Oct 16, 2005

We have all been there on some days. Days where no matter what you try to do, everything seems to go the wrong way. George Costanza the under achieving “Cult Hero” from Seinfeld figured out how to use this power in one of my favorite episodes. We harness that power to create “Fade the Up Move“.

The Strategy
The following strategy was suggested to us by one of our more outspoken subscribers who has the handle, “Diamondtrim”. This is a strategy that is designed to fade (go in the opposite direction of) a fast up move.

How is it created? Remember set-ups are always a combination of:

  1. alerts, subject to
  2. filters and
  3. exchanges or symbol lists.

How Its Modeled
This strategy follows a useful rule when designing set-ups: less is more. It uses only one alert as the trigger: our “Running Up Intermediate Alert” This strategy uses several filters to help define the a favorable universe to fade. It uses our volatility filter set at $0.10 (10 cents) to locate the stocks with the potential to move. How do we arrive at this number? To find volatility for your favorite stock use the “Stock Research” link from our web site type in your favorite symbol to see our volume weighted volatility and other technical indicators. Additionally this strategy sets a Min 15 Minute RSI filter to 70 This filter helps find the stocks that are technically overbought on a short term basis.

Who Could Benefit
The end result is “Fade the Up Move“. We looked at the history this produced and liked the results, especially trading right at the open, enough to share it with you – use this as a starting point or modify it some more for your own purposes. Try designing the opposite set-up and watch for opportunities to “Fade the Down Move”.

We look forward to your comments. Good luck.