3 bar decline pattern on $SPY – suggesting a bounce for tomorrow

3 bar decline pattern on $SPY 

Below the trading strategy ( a.k.a “3 bar decline” )  patter that triggered today at close , suggesting a bounce for the next day

1 bar decline definition

today’s open < prev day’s open && today’s high < prev day’s high && today’s low < prev day’s low && today’s close < prev day’s close

Here are the trading strategy rules that we employed

  • $SPY posts 3 bar decline
  • go Long at close ( i.e as on 24th Sep 2013 ,close)
  • exit at close at the next trading session ( i.e 25th Sep 2013, open)

Below the backtest performance summary of “3 bar decline pattern on $SPY  trading strategy”, since 2000.

go long at close when $SPY posts a 3 bar decline pattern and exit at next close , trading strategy , backtest performance summary since 2000

what if today is 3rd day of the week ? 

yes excel the tool we use considers Tuesday to be third day of week , and taking into account that , TA-25 ( Tel Aviv 25 ) starts opening on Sunday ,we might well call Tuesday to be the third day of the week 🙂

below the backtest performance summary of “go long at close when $SPY posts a 3-bar decline on 3rd day of week and exit at next close” trading strategy perfromance , since 2000.

  • Winners : 9
  • Losers : 2
  • % Winners : 82%
  • Average Change % : 1.41
  • Median Change % : 0.64
  • Maximum Gain % : 5.97
  • Maximum Loss % : -1.22
  • Average Gain %if Winner : 1.91
  • Average Loss % if Loser : -0.82
  • Average Gain % / Average Loss % : 2.33
  • Profit Factor : 10.30
  • Out-liar Adjusted Profit Factor : 7.55

below the last 25 trades generated by the “3 bar decline pattern on $SPY” for the readers to replicate the trading strategy in thier backtesting platforms !!

Date Close Lower Open Sequence Lower High Sequence Lower Low Sequence Lower Close Sequence Next Day Change Next Day Change %
24-Sep-13 169.53 3 3 3 4 ?? ??
19-Aug-13 163.97 3 4 3 4 0.81 0.49
10-Oct-12 140.21 3 3 3 3 0.08 0.06
04-Jun-12 124.05 4 4 3 4 0.94 0.76
18-May-12 125.64 6 5 6 6 2.16 1.72
17-May-12 126.72 5 4 5 5 -1.08 -0.85
16-May-12 128.63 4 3 4 4 -1.91 -1.48
10-Apr-12 131.6 4 5 4 5 1.07 0.81
09-Apr-12 133.85 3 4 3 4 -2.25 -1.68
25-Nov-11 111.46 8 8 4 7 3.23 2.9
23-Nov-11 111.67 7 7 3 6 -0.21 -0.19
06-Sep-11 111.51 3 3 3 3 3.14 2.82
08-Aug-11 107 5 5 11 3 4.98 4.65
29-Jul-11 123.27 3 6 5 5 -0.52 -0.42
12-Jul-11 125.24 3 3 3 3 0.42 0.34
08-Jun-11 121.8 6 5 6 6 0.93 0.76
07-Jun-11 122.31 5 4 5 5 -0.51 -0.42
06-Jun-11 122.39 4 3 4 4 -0.08 -0.07
05-May-11 126.72 3 3 4 4 0.56 0.44
24-Feb-11 123.64 3 3 3 3 1.32 1.07
12-Aug-10 101.5 3 3 3 3 -0.3 -0.3
01-Jul-10 96.02 3 8 3 4 -0.52 -0.54
24-Jun-10 100.37 3 3 4 4 0.42 0.42
06-May-10 105.03 4 5 3 3 -1.56 -1.49
28-Oct-09 96.18 3 3 3 4 2.07 2.15

SSRN paper that we are reading for the week

The Price of Wine by Prof, Elroy Dimson  (London Business School; University of Cambridge – Judge Business School) , Peter L. Rousseau (Vanderbilt University – Department of Economics) and Christophe Spaenjers (HEC Paris – Finance Department) published on September 6, 2013

Brief Summary : 

The  geometric average real return of 5.3% between 1900 and 2012. Taking into account storage and insurance costs lowers this estimate to 4.1%. Over our time frame, wine has been outperformed by equities, and that transaction costs may further reduce the relative attractiveness of wine. However, the performance of wine has been better than that of art and stamps—assets for which aging matters much less. In line with expectations, there was an evidence of positive correlation between the equity and the wine market.

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One thought on “3 bar decline pattern on $SPY – suggesting a bounce for tomorrow

  1. Pingback: Daily Quant Ideas from Paststat » Blog Archive When $SPX breaks 5-day non losing streak after a long time

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