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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank -- Ignore unavailable to you. Want to Upgrade?

To: kha vu who wrote (71472)	11/15/1999 12:16:00 PM
From: Jenna	Respond to of 120523

Thanks kha.. A word on Volatility and Earnings Plays. In order to properly anticipate which stocks from the earnings plays list will do well is the volatility factor in the stock BEFORE anticipation even begins. I have had dozens of trades (TENF, VRTY, VRTS, for example)that were mosying along quietly in a low volatility reading that was getting so low the bolling bands looked like the bottle neck of a wine bottle. Now imagine a typically volatile stock like VRTY or VRTS in such a bottleneck situation. Then picture the building up of pressure as demand is beginning for the stock and it is 'begging' to return to its normal historical volatilty. Background: 5 days before earnings or more.. suddently you get a signal.. some typical signals are volume contraction, doji candlestick, hammer, and/or most importantly range contraction. I have gotten some very good 'historical volatility, and mass index trading strategies from a Dr.Marek Vakkur who is an M.D. and writes articles that are awesome for Stocks and Commodities magazine. He uses a fantastic combination of Mass Index and Money Flow index to determine change of trend (it is more sensitive than ADX but its for longer term charts which I use before I even begin to post a stock on the watch list).. When I added the 'historical volatility' indicator it was such a good filter that you can actually see these 3 indicators alligning before a major breakout and change of trend..usually before earnings. Historical volatility also works nicely with r-squared and linear regression slope. If you need to find a low average true range it will confirm the low volatility because usually stocks that have a low average true range it is also ready to break out as it usually occurs in consolidating stocks (low volatility 'bottleneck' configurations). So basically the raw material is the good fundamentals because otherwise the stock will stagnate like a percentage of our earnings plays do. The same criteria work for high momentum and volatile stocks like GOTO, AOL etc. They also go through the same stages of range contraction, low historical volatility and other trend determining indicators also register low. When there is a change you can usually see it on the chart before the stock actually breaks out. (The chart of TTIL which I posted previously and a lot of charts that will be analyzed and explained according to some of these strategies later on).. Add a sprinkling of volume (you need volume increase otherwise the strength of the breakout is questionable).. you have at least a better edge with some of these stocks. A still better edge is to be familiar with historical price patterns of the stock and their VOLATILITY numbers. You can check those with a number of volatility indicators in Metastock.. You can download formulas from the equis website that let you compare historical volatility on different time frames.. like 8, 10, 50 and even 100 days for those longer term signals.