The QQQQCrash+ with Stocks
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Date updated:12-31-2006

In the last system we demonstrated that a combination of the QQQ Crash system with the 3x2 system produced some good results backtested. And since we posted the system, it actually triggered a trade on Tuesday, the day after Christmas, which was successfully exited on Wednesday at the close after the QQQQ had 2 up days.

The system works even better when applied to stocks. We added one more twist when playing it with stocks – to only buy stocks that are gapping down the day the system triggers. It actually works fine without that condition but so many trades trigger that its not realistic to play it in practice. As you'll see from the simulation below, the system works remarkably well, playing on the long side only, in the bear market years of 2000-2002. Its a great way to play volatility.

So here's the system:

BUY: at the open when a stock closes 1.5 standard deviations below the 10 day moving average of its lows on the prior day AND when its gapping down

SELL: at the close when the stock has had 2 up days in a row.


Wealth-lab code:

var Bar : integer;




for Bar := 11 to BarCount() - 1 do
begin


if LastPositionActive() then
begin


if ((priceclose(Bar) > priceclose(bar - 1)) AND
(priceclose(bar - 1) > Priceclose(bar - 2))) then

begin
SellAtClose(bar,lastposition,'SellAtClose');
end;
end
else
begin
if priceclose(bar) < BBandLower( Bar , #low, 10, 1.5) then
if priceopen(bar + 1) < priceclose(bar) then


begin

buyatmarket(Bar + 1, 'BuyAtOpen');

end;

end;
end;

symbol name last price % change open
  • +
  • CSCO
    Cisco Sys Inc
  • $25.49
  • -0.82%
  • $25.40

29 successful trades out of 36 occurrences for an average return of 4.49%. Last trade was on November 28-29, 2006 for a +5.7% gain.

People owning CSCO also tend to own: AAPLAMDDELLGOOGIBMINTCMSFT

  • +
  • AAPL
    Apple Inc
  • $183.45
  • -0.87%
  • $183.18

25 successful trades out of 34 occurrences for an average return of 2.75%. Last trade was July 13-18, 2006 for a 1.67% gain.

People owning AAPL also tend to own: AMDCSCODELLGOOGIBMINTCMSFT

  • +
  • BBBY
    Bed Bath & Beyond
  • $32.19
  • +0.19%
  • $31.95

25 successful trades out of 32 occurrences for a 3.61% average return per trade

People owning BBBY also tend to own: CAKEEXPGEMSFTXOMGRMNVLO

  • +
  • BEAS
    Bea Systems Inc
  • $19.01
  • 0.00%
  • $N/A

25 successful trades out of 31 occurreces for a 5% average return per trade. Average holding period: 4.4 days.

People owning BEAS also tend to own: AMGAMTBCRBEAVCERNCOGNDBD

  • +
  • BRCM
    Broadcom Corp Cl
  • $26.14
  • 0.00%
  • $25.57

23 successful trades out of 33 occurrences for an average return per trade of 4.02%.

People owning BRCM also tend to own: AWCCKCHECTXCYNFDOFDRY

  • +
  • AMZN
    Amazon.com Inc
  • $72.41
  • -0.52%
  • $72.20

30 successful trades out of 38 occurrences for an average return per trade of 5.24%

People owning AMZN also tend to own: EBAYAAPLACHALTICROXFCELJSDA

  • +
  • DELL
    Dell Inc
  • $19.03
  • +1.01%
  • $18.70

34 successful trades out of 39 occurrences for an average return of 4.42% per trade

People owning DELL also tend to own: AAPLAMDCSCOGOOGIBMINTCMSFT

  • +
  • IACI
    Iac/interactive
  • $21.54
  • +1.60%
  • $20.89

28 successful trades out of 34 occurrences for an average return per trade of 4.61%

People owning IACI also tend to own: EXPEMCDVRTXXECCELGGTRAD

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Results: Simulated on Nasdaq 100 stocks from 1997 until December, 2006, 1987 occurrences, 1402 successful trades, 70.56% success rate.

Average return per trade: 2.17%
Average holding period: 5 days

1997: +50%
1998: +30%
1999: +78%
2000: +145%
2001: +3%
2002: +41%
2003: +48%
2004: +17%
2005: +5%
2006: +14%

The system triggers about 250-300 times a year.

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01/11/2007 08:03 AM CST Asked by John Lay
James, what is the intended system behavior if the "buy" criteria are met multiple times prior to the "sell" criteria being met? I believe the code will just increase the position size. Is that what's wanted?

01/03/2007 17:37 PM CST Asked by Imran Omair
Hi James,
Is there any easylanguage code for this system ?? can we have it.

12/31/2006 15:43 PM CST Asked by john giglio
James I'm new to the site so forgive me if this has already been discuused. Does the buy trigger also require that the QQQQ ETF close 1.5 standard deviations below the moving average of its lows or are we only looking at the individual component stocks meeting this criteria?

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