What will be shown here is an experiment using some of the ideas presented in the "Supplemental Users Guide". This is only an example what can be done using a simple trading system involving only a "1" indicator PCF. In no way am I suggesting that you use this sytem to trade with without fully understanding what is taking place here. The examples shown were found by back-dating the PCF to a prior date.
Below is
a window of the Tab settings used. These are just for reference. Use what
ever you are familiar with for tab settings.
PCFs:
(Positive Divergence)
#1: (TSV18>=(MAX(TSV18,10)))AND(C<=MINC10)
#2: AVGV21 > 1000
The second PCF is to look at stocks that have an average 21 day volume
of greater than 100,000. These "2" PCFs were than put into an EasyScan.
Two stocks were found on August 13, 1999. HBCCA and VRTX. Their charts
are below. As you can see they turned out to be good picks. There were
actually three stocks found on that day by the PCF but the third "MMGR"
wasn't trading.
(Negative Divergence)
#1: (TSV18<=MIN(TSV18,10)))AND(C>=MAXC10)
#2: AVGV21 > 1000
This time we are going to look for stocks with negative divergence in
the TSV. This is what we I found on July 16, 1999. AMB, DBD, EVF, GTSG,
MVSN, NA, NOK, SKYT, XLK. From these I picked NA and XLK because of the
other indicators on the chart and also because the following day they
both showed a "Bearish Engulfing" candlestick pattern.
You can look at the other stocks. They are not all good selections, thats why you should use other confirming indicators. OK, so you say we got lucky, well what would the picks have been if the dates are reversed. So I did a Positive Divergence test on July 16, 1999 and got no hits. I then did a Negative Divergence test on August 13, 1999 and got (2) hits. NNS and WYN. WYN wasn't trading so that left just NNS which is shown below. As you can see this one took a couple days to confirm its downward movement.
This one didn't produce as much gain as the others, but if you look at
the S&P-500 on the dates these picks were made you may see why they
say to go with the market trend.
MACD Divergence Trading System:
PCFs:
(Positive Divergence)
#1:
(AVGC12-AVGC26)-(AVG(AVGC12,9)-AVG(AVGC26,9))>0AND(AVGC12-AVGC26)-(AVG(AVGC12,9)-AVG
(AVGC26,9))<(AVGC12.10-AVGC26.10)-(AVG(AVGC12.10,9)-AVG(AVGC26.10,9))AND(C<=MINC10)
#2: AVGV21 > 1000
On September 14, 1999 an EasyScan using both these PCFs found 70 stocks,
so to narrow down the list I ran the TSV positive divergence PCF on this
list of 70 and ended up with just (2) picks. CIV and SWK. Their charts
are below.
(Negative Divergence)
#1:
(AVGC12-AVGC26)-(AVG(AVGC12,9)-AVG(AVGC26,9))<0AND(AVGC12-AVGC26)-(AVG(AVGC12,9)-AVG
(AVGC26,9))>(AVGC12.10-AVGC26.10)-(AVG(AVGC12.10,9)-AVG(AVGC26.10,9))AND(C>=MAXC10)
#2: AVGV21 > 1000
On September 14, 1999 these (2) PCFs picked RKY, USON, AVT, EKO, ELF,
NTN, PR, TSEMF, UMR, USTB and ARDT. No confirmation from negative TSV
divergence. Below is the chart of ELF which may be ready for a little
pull back.
Remember: Everything shown here is for teaching purposes only and should not be used as a means to trade but only as a means to develope your own trading system.