NR4 Identification Guidelines
4 bars The pattern is composed of four bars.
Narrow Range The most recent bar must have a smaller high-low price range than the prior three bars (four bars, total).
Breakout A breakout occurs when price closes above the top or below the bottom of the NR4.
NR4 Trading Tips
Trading Tactic Explanation
Buy Once price closes above the top of the pattern or below the bottom of it, buy/short at the open the next day, respectively.
Alternate buy Another method is to use the last day of the NR4 as a trading signal. A close above the top of the last day, or below the bottom of it may suggest the trend direction. Ride price following the new trend until the swing ends. I have not tested this method, so make sure you do.
Measure rule The NR4 fulfills the measure rule only 55% of the time (bull market, up breakout). That is, measure the height of pattern and add it to the highest price in the pattern to get an upward target or subtract it from the lowest low in the pattern to get a downward price target.
NR4 Performance Statistics
For the following statistics, I used 1,200 stocks, starting from January 1990 to March 2013, but few stocks covered the entire range. All stocks had a minimum price of $5. Since there were too many samples, I only used one of every 50. There were two bear markets in the 2000s (as determined by the S&P 500 index), from 3/24/2000 to 10/10/2002 and 10/12/2007 to 3/6/2009. Everything outside of those dates represents a bull market.
For each NR4, I found when the trend started and when it ended. To find the trend peak or valley, I found the lowest valley and highest peak within plus or minus 5 days (11 days total) each, before the NR4 and the same peak/valley test after the NR4. The closest valley or peak before the NR4 is where the trend began. The closest peak or valley after the NR4 is where the trend ended. I compared the peak or valley to the average of the highest high and lowest low price of the Nr7 pattern.
The 5-bar peak or valley number tends to find major turning points on the daily charts.
I measured performance from the day after the breakout (opening price) to the nearest trend peak or trend valley.
NR4 Performance and Failure Rates
Table 1: Performance and Failure Rates
Market/Breakout direction 5% Failure Average
Rise/Drop
Bull market, up breakout 46% 7%
Bull market, down breakout 48% -6%
Bear market, up breakout 37% 8%
Bear market, down breakout 28% -12%
Table 1 lists failure rates, sorted by market condition and breakout direction along with the average rise or decline.
A failure occurs when the stock fails to move in the direction of the breakout more than 5%.
The failure rates may appear high, but that's typical for short-term patterns like the NR4.
NR4 Measure Rule
Table 2: Measure Rule Performance
Market/Breakout direction Success
Bull market, up breakout 55%
Bull market, down breakout 51%
Bear market, up breakout 47%
Bear market, down breakout 50%
Table 2 shows how often the measure rule works. Use the measure rule to estimate of how far price is likely to rise or drop.
To do this, measure from the high to the low in the pattern to get the height. Add the height to the high or subtract it from the low to get the target. |
狗仔卡
发表于 2015-6-16 02:51 PM
