Thursday, May 26, 2011

PatternDNA - CANSLIM Analysis May 26th

Our recent CANSLIM scan introduced Agrium (AGU) at the expense of F5 Networks (FFIV) (Build your CANSLIM stock screen). So what's the PatternDNA outlook for the coming five days in these eight stocks?

PatternDNA projections are derived from a pool of 18 U.S. stocks. Expected returns and win probabilities are calculated from patterns matched in stocks over the past year and performance assessed from the next open price after the pattern completes. The Average Return per Trade is based on the use of a trailing target and stop, and assumes a long position bought at the next open price (Initial stop of 10%, raised to 5% off the price reached on a 15% gain. Ultimate Profit Target of 25%).

Collectively, the outlook for the coming five days is relatively neutral. Only Baidu (BIDU) offered a projection of substance, with Research in Motion (RIMM) and Barrick Gold (ABX) behind.

PatternDNA projected a 60%+ probability of a higher close for days 1, 2 and 5 after the Pattern completes in Baidu (BIDU). However, the performance of this Pattern when a trailed stop is employed is more modest given the projected win percentage for a profitable long trade is below 60%.

Barrick Gold (ABX) offers the brightest trading opportunity when a trail stop is employed; near 70% winners with an Average Return per Trade of 4.5%. Research in Motion (RIMM) exhibits a Pattern with the highest projected Average Return per Trade of 6.0%; this from 66% winning trades and a 63% probability for a higher close next Wednesday.

While the May 3rd outlook failed to live to expectations, oversold market conditions may offer more here.

How did PatternDNA perform on May 3rd?

PatternDNA had projected a relatively flat couple of days with an average 59% probability for a gain on the fifth day after a pattern completed. Unfortunately, the market wasn't so forgiving; two of the eight stocks closed higher, with losses in the 3-5% range for most stocks over the five day period.

Barrick Gold (ABX) offered the strongest projection over the short and long(er) time frame, but it finished down -3.8%. It was projected to finish lower on the second day and it did meet this goal.

Of the four (AAPL, ABX, BIDU and NFLX) stocks which had a bullish projection (i.e. a probability greater than 60% for a higher close) by day 5, two showed a loss and two finished effectively flat; NFLX finished up +0.3%, AAPL down -0.1%, while BIDU and ABX had losses of -3.5% and -3.8% respectively.

In summary

2 of 5 projections which offered a 60%+ probability were true.


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