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Strategies & Market Trends : Tech Stock Options
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To: Nancy who wrote (27909)11/6/1997 9:24:00 AM
From: Tom Trader  Read Replies (2) of 58727
 
Hi Nancy re your questions:

>>How would your system respond to the big rally Tuesday we had last week after such a sharp sell-off ? just wonder would your system be able to generate signals when market turned around so quick ?<<

I got a buy signal that day when the market rallied after the big decline--but based on my system, I am not allowed to take the buy signal because of the sharpness/momentum of the decline. I believe that I posted to Kevin(?) that a buy signal was generated--but that I was not taking it.

>>what did the system perform during April's reversal ? In April, the reversal was just about as quick, except the initial sell-off wasn't as sharp<<

The buy signal in April was timely--if you look at the charts there was a period of minor consolidation that occurred -- besides the momentum on the downside was not as powerful. Now the rally off the April lows was very strong with a lot of momentum--and so once I exited my long position, I could not take a short position without first going long again and that worked out well.

The basic premise behind this is that strong moves in any market/stock don't just turn on a dime--there usually is a period of consolidation before the trend resumes or reverses. It clearly has not happened this time--the stock market did reverse and has not really looked back so far. I have to say, however that I am not impressed with the momentum on the upside--erratic and not what one really sees with sustained moves.

Take care
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