Question from IM Support today:

Subscriber: (3:47:59 PM): do you have any scans for setups that have like a 30 day high, then consolidates for about 5 days and then breaks out of that consolidation?

Some of the details of his request are changed to protect his idea. The tricky part of this request is the 30-day high requirement before the real pattern he’s looking for happens. My solution forces all the stocks in the strategy to be a minimal amount above the 20-day moving average.

The Strategy: “5-Day Consolidation Breakouts Above the 20-day SMA – Long on the Dip“

The Odds Maker Results
The Odds Maker provided this analysis as of the close on March 23rd 2007:

48 / 109 = 44.04% up $0.01 in 120 minutes; Average winner = $0.1626, Average loser = $-0.0537, Net winnings = $5.0671, Best = $0.70, Worst = $-0.23; Casino Factor = 99.18%

What do these results mean? What’s nice is the approximately 3 to 1 ratio between the average winner and average loser – this can allow for items not modeled in The Odds Maker like commissions, slippage, etc. Our 2×2 Decision Box will let you decide just how good these results are.

How It’s Modeled

The full set-up consists of 1 alert:

“25% pullback from highs” – Buying on a small retracement or breather can serve as a good entry point. The Odds Maker tells me what the average loss for the strategy is so I don’t stay with a loser. I combine that with the individual stock’s natural volatility (“Volume Weighted Volatility“) found in our Stock Research Center and then I have my stock-specific statistically proven stop-loss target.

The alert occurs only after passing the following filters:

“Max Position in Year Range” – Set at the 45th percentile, this just tested well using The Odds Maker. I can’t explain why.

“Min Up from 20 Day SMA”

“Min Consolidation” – Set at 5 days

“Min Position in Consolidation” – Set at the 95th percentile of the range