Wednesday, April 12, 2006

Why I like to play "breakout"?

http://www.activetradermag.com/special/
cyber06april1.htm
This author investigates 20 day breakout patterns in the S&P 500 tracking stock (SPY) since 1993. Many traders monitor 20-day breakouts, but is it really working?

In the end, he concluded "Overall, the performance after new 20-day highs and lows underscores the stock market’s upward bias. Breakouts above 20-day highs were more likely to be followed by continued gains than losses, while "breakdowns" below 20-day lows were more likely to be followed by upside reversals. The market’s initial tendency to rebound off lows is a broad pattern we’ve found in previous studies."

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