TIGERSOFT's and Price Momentum
(c) 2013 www.tigersoft.com All rights
strictly reserve
Strongest Stocks for A Year
Anythng out of the ordinary in the stock market is worthy of attention. Unusual
rates of advance or decline are definitely wothy of attention, especially at
market turning points. One longer-term measure of price momentum is the
rate of change of the Tiger Least Square Line. Unusually high numbers for
annualized rate of change for the DJI has been a very good predictor. The
five years with the highest annualized rate of change for the least squares line
for the DJI since 1929 show this. As one goes lower, the reliability of a
rally the next year starts to breakdown. So, we always want to work with the
very strongest examples wherever possible. But with individual stocks, the
danger is that a bear market will more than wipe out the previous year's good gains.
So with stocks, momentum must take into account how close we are to a
major bear market. We must use Peerless.
Annualized AI/200
DJI's Gain next year
Least Squares
Rate of Change
-------------------------------------------------------------------------
1935 .531
178 144.1 to 179.9 or +24.8% gain
1954 .389
178 404.4 to 488.4 or 20.8%
2009 .367
160 10428.05 tp 11674.76 or +12.0%
1958 .343
183 583.7 to 679.3 or 16.4%
1995 .330
186 5115.12 to or 26.1%
When
we onsider the Annualized Rate of Changes for AAPL since 1981, we
have a smaller number of years than the previous study of the DJI, 31 versus 84 years
for
the DJI. Even so, it points out some important considerations. It shows
the
major limitation of applying momentum too blindly to stocks. We find that only
four of the highest 6 least square's line's annualized rate of change brought gains.
A major bear market can turn down even AAPL in these years. This what
happened following 1999 and 2007. It is significant that best gains came
where AAPL led a new bull market: 2004 and 2009. So year-long rates of
change
are best used with stocks in the early years of a bull market. Here
are
the details.
AAPL's Annualized AI/200 DJI's Gain next
year
Least Squares
Rate of Change
-------------------------------------------------------------------------
1999 2.494
164 25.702 to 7.435 Bear
Market followed
2004 2.33
169 32.3 to 71.89
new Bull Market
2009 1.617
147 210.73 to 322.56 new Bull
Market
2007 1.561
176 198.08 to 85.35 Bear Market
followed.,
1998 1.060
113 10.233 to 25.702
2005 1.056
147 71.89 to 84.83
Data for AAPL from 1981 to 2012
1981 -.426 2.773
1982 .751 3.734
1983 -.429 3.046
1984 -.039 3.64
1985 -.418 2.75
1986 .675 5.063
1987 .617 10.5
1988 -.065 10.063
1989 .136 8.819
1990 -.026 10.75
1991 -.101 14.092
1992 -.211 14.938
1993 -.653 7.313
1994 .232 9.75|
1995 -.071 7.968\
1996 -.252 5.218
1997 .039 3.28
1998 1.060 10.233 #5
1999 2.494 25.702 AI/200=164 #1
2000 -.625 7.435
2001 .016 10.95
2002 -.481 7.165
2003 .715 10.685
2004 2.33 32.3 AI/200=169 #2
2005 1.056 71.89 AI/200=147
2006 .211 84.83
2007 1.561 198.08 AI/200=176 #4
2008 -.365 85.35
2009 1.617 210.73 AI/200=147 #3
2010 .591 322.56
2011 .209 405.00
2012 .077 506.9
Does
buying the best-performing stocks for the previous year work for the
next
year? We can answer this using the Tiger download BEST2012 or
using
the study itself
that I published on 12/31/2013. The 16 best performing
stocks
here for 2012 were all up more than +250%. As you can see 4 of them
fell
sharply in 2013, a very good year for most stocks. Year-long momentum
late
in a bull market is of limited value. But there is a good way to lock in profits
and
still let some of the best stock continue to rally. The system here is simple.
Sell
if the stock closes below its 65-dma. This worked beauticully in 2013 for ACAD
and
PGTI. PCYC does show that there can be false breakdowns for a few days below
the
65-dma.
Stocks
up
Dec.
31,2013 2013 Gain
2013 Crossing
the
most
Dec
31, 2012- of 65dma:
in
2012
Nov
18, 2013 Date
Price
=====================================================
HOVNP + 750%
13.60
+8%
10/1/2013
17.0
GV
+ 651%
3.34
+6%
4/3/2013
3.34 Rising Wedge
SNFCA
+ 477% 8.35
-34%
2/20/2013
9.31
CPSS + 476%
5.36
+23%
4/29/2013
8.82 Head/Shoulders
BDSI
+ 432%
4.30
+14%
below
65dma in January 2013
REED
+411
5.68
+13%
below 65dma in January 2013
CLSN + 376%
32.72
-80%
1/31/2013 6.00
ARNA + 369%
9.02
-47%
1/23/2013
8.68 false breakout.
PGTI
+ 332%
4.50
+108%
9/25/2013 9.69
MSON +324%
8.06
-51%
2/8/2013
5.65 triangle breakdown
ACAD
+318%
4.65
+367%
no cross-overs below 65dma-
28.09
WSBF + 306%
7.80
+38%
2/8/2013
5.65 triangle breakdown
HW
+ 292%
8.56
+4%
9.72
4/15/2013 false breakdown
PCYC
+284%
57.78
+97%
76.33
4/4/2013 false breakdown
BONT + 282%
12.15
-4%
1/7/2013
false breakdown
PATK
+ 261% 15.56
+77%
below 65-dma at
start of year.