BDH and TTH, Histrionics

I figured a little more historical testing was in order so, using the S&P sectors (smaller list) and related ETFs the following was the ideal trade setup according to my BPI trading rules so far. I did the total S&P 500 already and ended up using the QQQQ ETF and would be showing a single trade gain of 56% over the last 9 months. Seeing as that is a good return and it was using the general index I figure it would serve as decent benchmark.


Using the same dates from the S&P study I applied them to the sector study.


Major sectors are: (with the stockcharts.com symbol)


S&P500 total - SPX
Transport - GSPTRN
Consumer Discretionary - SPCC
Consumer Staples - SPST
Energy - SPEN
Financial - SPF
Health Care - SPHC
Industrials - SPI
Info Tech - SPT
Materials - SPM
Telecom - SPTS
Utilities - SPU


March 11, 2009 the S&P500 breaks 20% BPI on the way up and Telecommunication Services is the overall best performer over various timeframes with Information Technologies a close second.


Take Telecom. The two ETFs that were front runners were BDH and TTH as of March 11th. BDH did spend more time outperforming on up moves on a larger scale but as TTH spent less time underperforming in the downturns. Comparing only the two leaves no clear long term winner but BDH is a short term outperformer.


BDH on March 11th close at $8.46, buying with a limit at that price on the 12th. Using a $1.50 stop puts me still in the trade today at $12.41. A 47% gain on a straight all at once purchase.


Using Williams %R as an oscillator during an uptrend can give decent buy signals for additional lots to scale the position up...


May 14th at $10
July 8th at $11
August 18th $11.67...although this entry is questionable as the sector BPI is highish


This sector often does not reach 70% of late so that is the target to watch. September 27th the BPI in this sector hits 70%, time to tighten up the stop or just take profits. Sell for about $12 either way actually.


So, even lots makes three purchases of $8.46, $10, $11 for an ACB of $9.82 and a gain of $2.18. An overall 22.2% gain.

Putting the exact same timing and execution into TTH results:

Trade 1 = $20.69
Trade 2 = $22.12
Trade 3 = $22.00
Trade 4 = $22.86
ACB = $21.92
Sell at $24.30
Gain of $2.38 or 10.9%

While the returns sound low the absolute dollar value of the trades are $654 and $952 if each trade was 100 shares... although that puts about $12,000 to work for an overall 13.4%. This is OK and can just add to the trading options available to me.

Keeping in mind that the $12,000 is a margin account that really means that I could be using as little as $4,000 of my capital and the return based on this is now 40.1%. A much better return. While I don't normally like the idea of using margin to the max I believe that this trading strategy may warrant the risk in order to get more trades in play to add diversity... mitigating the risk.

Jeff.