Highlighted Trades - 05/08/2024
We saw 7 trades today (6 long and 1 short) across 5 unique tickers. Let’s check them out.
Our big winner today was AEP, where we made 0.17% across 3 entries. I’ll say right away that I like our first entry a lot, but not either of our re-entries. On the initial entry, our conditions are fairly strong. The cross is solid, a good MACD, and cooperative lagging line. That said, by the time we make re-entries, MACD had been negative for some time, and during both re-entires, was barely above 0. This is a frequent red flag, and one we’ve discussed before on these reviews. It’s readily obvious to a human trader when this is happening, but it’s difficult to catch algorithmically, since it requires hard thresholds relative to prior levels. I can say with certainty that I would have ignored both re-entries, in which case the total return would have increased to 0.24%.
Alternatively, this was a great trade to take and hold until EOD, since the stock continued to climb and the TK-cross never reverted. This would have required you to recognize false stop-outs, but if you took that approach you could have had a great win here - up 0.78% by market close!
Our biggest loser of the day was MMC, losing us 0.20%, with no re-entries. It’s unfortunate that this trade got alerted, but it’s an obvious fake-out. This one’s pretty simple, in that the TK-cross is visibly a very weak one. Our algorithm evaluates the strength of a TK-crossover by how long the Tenkan-Sen line was previously beneath the Kijun-Sen line. In this case, it was beneath it for 10 candles, which suggests a meaningful cross. The problem is that, when it did cross, it only barely went above.
Again, it’s unfortunate this one was signaled, but in all likelihood, no one actually took this trade.
The last trade I want to discuss is this long on ETR, as a companion study to our review of the MMC trade. We ended up almost completely in the black here, with a return of 0.02%. The only real red flag here is the flat Kijun-Sen line, but given the strong momentum and very strong TK-cross, it’s understandable if you considered that red flag to be mitigated. It looks like we just got unlucky on this one. I bring it up not to highlight our misfortunes, but to note that even when the TK-cross is extremely strong, that in and of itself isn’t a guarantee of success.
That’s all I have for you tonight. As always, thank you for reading and happy trading!
