I analysed NASDAQ data for the period 1 July 1996 - 10 Nov. 1996 for DCB stocks.
Using the following criteria I found 80 stocks:
1,000,000 or more shares traded on day stock drops
Close on day drops = 70% or less of preceeding days Close
My analysis showes the following:
The following shows the average dollar differences:
Low on drop day - high next day 1.874
Low on drop day - close on drop day 0.977
Close on drop day - high next day 0.896
Close on drop day - open next day 0.432
Close on drop day - close next day 0.218
I then went over the stocks and eliminated duplicates for days that had more than one chosing on two criteria, if the price was withing 2-40 range I selected on larger volume, if price was above 40 I selected cheaper price to better take advantage of possible smaller move, ie more shares. This left 48 stocks.
I then started with 10,000 dollars and set the buy and sell prices in different ways. All buys were for the maximum even number of shares.
All buys are priced 25 cents above low/close, and all sells are priced 25 cents below open/high/close, to cover the probable spread differences.
Method 1 buy at close, sell at close: This yeilded $23995.55 for the period, for a profit of $13995.55.
Method 2 buy at close, sell at open. This yeilded $65.645,25 for the period, for a profit of $55,645.25.
Method 3 is a little more complex, as the price falls during the first day of dropping a stop limit buy is placed 50 cents above the low and is corrected as the price drops lower, if the price does not correct to this level then the buy is placed at the closing price, as I don't have the price 15 minutes or so before closing. The stock is then sold at market the following morning. This yeilded by far the best returns, $750,114.00.
I know that seems difficult to believe but those are what foxpro and excel cranked out, the data is frim historical files from Quote.com. |
