Turtle Soup with SPYders, Anyone?
Not only did SPY generate a buy signal as targeted by my current swing method, it appears that alternate rule I talked about in the previous post (which would have given me an entry over a dollar lower) may be finding its way into my plan soon.
But what I want to talk about tonight is the fact that we got a buy signal from another method as well, a method with the weight of some 800lb gorillas behind it: The Turtle Soup method made famous by Linda Bradford Raschke and Laurence Conners in the 1990s.
Turtle Soup was designed as the contrary trade to the 20-day breakout/ breakdown entries used by the renowned Turtle Traders back in the ’80s. What Turtle Soup did was to trade the failure of a breakout or breakdown.
The way it works is pretty straightforward. Look for a new 20-day closing low on a stock that had its previous 20-day low more than three sessions back. The next day, if price breaks back above the earlier low, get long with a stop below the near-term low.
This turned out to be a very high-percentage trade, and it’s said that some people made their entire living from it. In the ensuing years, the technical sophistication of the market, continuing globalization of markets, and the millions of ways to arbitrage for every cent have caused these breakouts to get “noisy” and often a clean setup is hard to get.
Well, SPYdey gave us one today:
Yesterday’s close was a new 20-day low below the 6/7/07 low of 149.06. Today the price climbed back above that level, triggering a long entry with a stop at the near-term low (today’s, in this case) of 148.06.
The fact that “DSM I ®” generated a buy signal which is nearly identical to that of such a tried- and- true method tells me that this old hound dog is picking up on some of the same scents as champion hunters from the past. That’s goooood.
Gotta run, it’s after midnight, I’m due at work in a few hours, and suddenly I have the urge to scratch some fleas.
Bill a.k.a. NO DooDahs! said,
June 28, 2007 @ 8:30 am
Plus, the 2-day RSI method gave a buy signal on Monday.
Good times. Let’s see if it works …
doc40 said,
June 28, 2007 @ 2:12 pm
I’ve added my version of Turtle Soup (may not be per your description; using the lows of the past 20 days and today’s open) and added it to my StradegyDesk’s chart “studies”. It toggles between zero and one and shows good correlation with my R2 buy equation. I’ve also done the same thing with Oscar’s Outside Reversal and Mirror Image descriptions. They too look informative.
Will said,
June 29, 2007 @ 8:22 am
Bill - Hmm… multiple confirming buy signals. Traditionally, the best buy signal would be for me to announce that I’m short
doc40 - Sounds like a great idea — thanks for the info! I haven’t been able to watch Oscar much lately (although I should, his charisma is infectious), but I’m thinking his Outside Reversal and what I call an OGRe (Opening Gap Reversal) are very similar. Such a gap- and- reverse outside of a 20-day high/low could be a *really* strong signal providing a *really* tight stop. I’ve done something similar where I watch for OGRes on stocks above/below extended RSI readings, but the 20-day channel sounds like a great candidate as well!