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Strategies & Market Trends : TA-Quotes Plus
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To: TechTrader42 who wrote (4920)6/26/1998 3:36:00 PM
From: Howard R. Hansen  Read Replies (4) of 11149
 
Hold on Gonzongo and Brookelise not so fast with comments like:

"...after testing many a funnymental scan- I dumped them in the recycle bin. "

"Same here, I confess. Traded the funnymentals for the true fundamentals: price and volume."

These comments might be true for short holding periods but they are not true for longer holding periods. Here are some results I obtain when using a 1 year holding period.

Select stocks with a PSR less than or equal to 0.264: 62.1 percent of the selected stocks increased in price and they had an average change in price of 32.7 percent in 1997.

Select stocks with a price to sales ratio, PSR, between 1.25 and 2.2: 73.3 percent of the selected stocks increased in price and they had an average change in price of 29.1 percent in 1997.

Select stocks with increasing earnings in the prior two years. 71.3 percent of the selected stocks increased in price and they had an average change in price of 26.1 percent in 1997.

Select all stocks in the Quotes Plus data base on December 31, 1996:
61.8 percent of the selected stocks increased in price and they had an average change in price of 21.2 percent in 1997.

Select stocks with a QRS greater than or equal to 90 on December 31, 1996. 51.7 percent of the selected stocks increased in price and they had an average change in price of 14.1 percent in 1997.

Select stocks with a PSR greater than 6.9: 41.6 percent of the selected stocks increased in price and they had an average change in price of -2.4 percent in 1997.

The most interesting thing I noticed was that stocks with the largest price momentum at the beginning of 1997 did worse than the average stock in the Quotes Plus Database. Others might come to other conclusions but for stocks I wanted to buy and hold I believe a selection criteria that used fundamentals is a much better approach than using technical analysis. Where as technical analysis is superior for short term trading.

Note: Stocks selected using PSR and increasing earnings were selected using the November 2, 1996 edition of the Zacks Research Marvel Database.
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