The Mega Gap System
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DESCRIPTION:

Date updated:02-06-2007

This is a gap down buying system that applies to the current members of the NDX index.

The system looks at days where the overall index as represented by the QQQQ tracking stock is gapping down by a volatility adjusted amount, and buy’s the members of the index that are gapping down by an even larger but also volatility adjusted amount.

BUY Stock XYZ: If QQQQ is gapping down more than the value of VIX / 100% (so if VIX is 20 then QQQQ has to gap down more than 0.2%) AND if stock XYZ is gapping down more than the greater of 2% or VIX / 10% (so right now a stock would have to be gapping down more than 2%).

SELL: at the close.

To the left are some of the stocks that have worked very well in the system.

symbol name last price % change open
  • +
  • CHKP
    Check Point Softw
  • $32.31
  • 0.00%
  • $N/A

29 out of 42, 70% success rate, avg return 1.8% per trade.

People owning CHKP also tend to own: AEOSCRYPHNRPAYXTCHCTRLGCOSI

  • +
  • CHTR
    Chtr
  • $0.00
  • N/A
  • $N/A

16 successful trades out of 25 occurrences. avg return: 2.46% per trade

People owning CHTR also tend to own: BJRIFLMLHRTLPHINWKORBCSTXN

  • +
  • BRCM
    Broadcom Corporat
  • $28.80
  • -2.01%
  • $29.56

32 successful trades out of 50 occurrences, avg return: 1.5% per trade

People owning BRCM also tend to own: AWCCKCHECTXCYNFDOFDRY

  • +
  • DELL
    Dell Inc.
  • $13.39
  • +1.13%
  • $13.28

44 out of 68, 1.44% per trade

People owning DELL also tend to own: AAPLAMDCSCOGOOGIBMINTCMSFT

  • +
  • ELNK
    Earthlink
  • $8.26
  • +0.73%
  • $N/A

24 out of 31, 2.32% per trade

People owning ELNK also tend to own: CAMPCEGEFCELIDIXJBLUTALKTIE

  • +
  • NITE
    Knight Capital Gr
  • $15.08
  • -1.31%
  • $N/A

21 out of 29, 3.88% per trade

People owning NITE also tend to own: HIGMSFTAAPLBIDUBLE.TOCHKCRY

  • +
  • NTES
    Netease.com
  • $33.93
  • +4.40%
  • $N/A

14 out of 21, 1.45% per trade

People owning NTES also tend to own: AAPLACIAEMCOPERFGOOGHAL

  • +
  • NVLS
    Novellus Systems
  • $21.48
  • -0.56%
  • $21.53

22 out of 31, 1.72% per trade

People owning NVLS also tend to own: AMATAMDAMXCNQRDADWIIG

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Simulated using 10% of equity per trade on the 300 most volatile stocks in the Nasdaq. The test runs from January 1, 2000 to Dec 31, 2006. That period encompasses bear markets, bull markets, volatile, non-volatile, meandering markets, etc.

Results:
2,992 occurrences of the system. 1841 winning trades (61.5%), average return per trade (including both wins and losses): 1.25%


2000: 88% 611 occurrences
2001: 96% 663 occurrences
2002: 128% 560 occurrences
2003: 71% 313 occurrences
2004: 62% 447 occurrences
2005: 15% 193 occurrences
2006: 10% 205 occurrences

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