PatternDNA of the week: AJGFD

This week's rare pattern appeared in Baidu (BIDU). At a neutral Match setting the pattern was found only 28 times from 18 stocks over the past year. It opens with a strong bullish day and is followed by a sequence of three bearish days before finishing with a modest bullish day. It is similar in appearance to the more commonly known "Rising Three Method" continuation pattern.



It had an interesting dynamic between short term, and trade performance. Short term performance improved as the match conditions tightened, but the long(er) term trade performance - as measured by Average Return per Trade (Average Return per Trade applies an initial stop of 10%, raised to 5% off the price reached on a 15% gain. Ultimate Profit Target of 25%) - fell.

Match	No. of Patterns	1-day % Win	2-day % Win	5-day % Win	Average Return Per Trade (> 5 day)
Weakest	125	53	52	57	4.5
Weak	61	61	61	61	4.2
Neutral	28	64	67	66	3.9
Strong	6	83	83	83	2.6
Strongest	4	75	75	75	4.8

Unlike some of the former PatternDNA patterns we have featured, this particular one offered the most at the Weak match. Ordinarily, the Strong match tends to be the sweet spot for a particular pattern, but given the low sample size it's hard to be convinced on merit here. Also, at the Strong match, only half of the potential trades were profitable, compared to 61% at the Weak match (data not shown) - hence the higher Average Return per Trade.

Baidu (BIDU) was one such stock with this pattern, but at the Weak Match there were 81 matches in the S&P and just 12 at the Neutral Match.

One of the stocks in question was Chubb Corporation (CB). Chubb made a solid breakout in the middle of April and held those gains as the market headed south. It is nicely positioned to take advantage of the bullish implications of this pattern.



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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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Dr. Declan Fallon, Senior Market Technician for Zignals.com, offers a range of stock trading strategies via his Zignals home page. Each Zignals member has an unique home page which they can share with friends and clients to sell their strategies.

Zignals offers a full suite of financial services including price and fundamental stock alerts, stock charts for Indian, Australian, Frankfurt, Euronext, UK, Ireland and Canadian stocks, tabbed stock quote watchlists, multi-currency portfolio manager, active stock screener with fundamental trading strategy support and trading system builder. Forex, precious metal and energy commodities too. Build your own trading system and sell your trading strategy in our MarketPlace to earn real cash. Read what others are saying about Zignals on Investimonials.com.
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PatternDNA - CANSLIM Analysis May 3rd.

Last week saw a shuffle in our CANSLIM Top-8 with the return of Netflix (NFLX) and F5 Networks (FFIV) at the expense of Intuitive Surgical (ISRG) and Free McMoran (FCX). What's the current outlook for the CANSLIM 8?

PatternDNA projections are derived from a pool of 18 U.S. stocks. Expected returns and win probabilities are calculated from patterns matched in these stocks over the past year and performance assessed as from the open price the day after the pattern completes. The Average Return per Trade is an expected long(er)-term return based on the use of a trailing target and stop (Average Return Per Trade assumes an initial stop of 10%, raised to 5% off the price reached on a 15% gain. Ultimate Profit Target of 25%).

The Median outlook for today and tomorrow is neutral, but there is a 59.5% probability for a higher close next Monday for these stocks.

Four stocks have a 60% or greater probability for a higher close Monday: Apple (AAPL), Barrick Gold (ABX), Baidu (BIDU) and Netflix (NFLX). Oddly enough, Barrick Gold (ABX) also has a 66% probability for a lower close tomorrow (Wednesday)! Certainly it will be a stock to watch over the coming days.

The long(er) term trade outlook using a trailed stop (initial stop of 10%, raised to 5% of the price reached on a 15% gain; ultimate profit target of 25% assuming stop not hit) was also positive. Barrick Gold (ABX) offered the strongest outlook with a 78.3% probability of a winning trade with an Average Return per Trade of 10.3%. Netflix (NFLX), Research in Motion (RIMM), Free McMoran (FCX), Vale (VALE), Baidu (BIDU) and F5 Networks (FFIV) all had probabilities of 70% or more for a profitable trade with an Average Return per Trade ranging from 5.9% to 6.4%. But particular reference should be made to Vale (VALE), Baidu (BIDU) and Research in Motion (RIMM) where the number of signals contributing to the probability factor were 244, 244 and 301 respectively - not a small sample size.

Only Apple (AAPL) underwhelmed with is 58% probablity and 2.8% Average Return per Trade.

With the markets starting the day weak, it might be prudent to adopt a more positive outlook for the coming week?

How did PatternDNA perform last week?

It was a mixed bag. PatternDNA had projected a greater than 60% probability for a higher close on the fifth day, post-pattern, for five of the eight stocks. Ironically, Research in Motion was the only one of the five to gain, posting 4.8% on the week, only for it to drop 14% the next day (what would have been day 6) on lowered guidance. Losses for the other four stocks ranged from a minimal -0.1% loss for Baidu (BIDU) to -8.2% for Barrick Gold (ABX).

The greater than 60% probability for a lower close for Cognizant Technology Solutions (CTSH) on day 1 and 2 post-pattern resulted in a gain on day 1, but a fall on day 2 to fulfill the latter day projection.

In summary:

2 of 7 projections which offered a 60% probability were true
0 of 1 projection which offered a 70% probabilty was true

------------------

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Zignals offers a full suite of financial services including price and fundamental stock alerts, stock charts for Indian, Australian, Frankfurt, Euronext, UK, Ireland and Canadian stocks, tabbed stock quote watchlists, multi-currency portfolio manager, active stock screener with fundamental trading strategy support and trading system builder. Forex, precious metal and energy commodities too. Build your own trading system and sell your trading strategy in our MarketPlace to earn real cash. Read what others are saying about Zignals on Investimonials.com.
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PatternDNA of the Week: HGGYZ

This week's pattern comes from Progressive (PGR). The sequence is built off a mild bearish day, followed by two bearish days, then two neutral days.



The pattern performed strongest on the second day after the pattern, although at the Strong Match there was a low number of matches.

Match	No. of Patterns	1-day % Win	2-day % Win	5-day % Win	Average Return Per Trade (> 5 day)
Weakest	165	55	60	57	5.4
Weak	62	59	66	60	4.7
Neutral	33	58	77	70	6.0
Strong	8	40	90	70	4.1
Strongest	0	n/a	n/a	n/a	n/a

Despite the strong outlook over the second and fifth day of the pattern, the picture over the longer term was more mixed. The Average Return Per Trade (Average Return Per Trade assumes an initial stop of 10%, raised to 5% off the price reached on a 15% gain. Ultimate Profit Target of 25%) didn't exhibit a consistent return on increasing Match. Over the basket of 18 U.S. stocks the Average Return ranged from 4.1% to 6.0%.

However, despite the inconsistent Average Return Per Trade the win percentage remained consistently high, ranging from 75-82%. So while a handful of outsized losses brought down the Average Return it's a regular winner.

Running a Market Scan at a Neutral Match returned 12 matches. One of the 12 stocks was Mattel (MAT), a stock which recently enjoyed a breakout. Is this pattern a good omen going forward?

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Dr. Declan Fallon, Senior Market Technician for Zignals.com, offers a range of stock trading strategies via his Zignals home page. Each Zignals member has an unique home page which they can share with friends and clients to sell their strategies.

Zignals offers a full suite of financial services including price and fundamental stock alerts, stock charts for Indian, Australian, Frankfurt, Euronext, UK, Ireland and Canadian stocks, tabbed stock quote watchlists, multi-currency portfolio manager, active stock screener with fundamental trading strategy support and trading system builder. Forex, precious metal and energy commodities too. Build your own trading system and sell your trading strategy in our MarketPlace to earn real cash. Read what others are saying about Zignals on Investimonials.com.

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PatternDNA - CANSLIM Analysis

Building on the previous article, how does PatternDNA assess the outlook over the next five days (starting from Thursday's open) for our 8 CANSLIM picks.

PatternDNA projections are derived from a pool of 18 U.S. stocks. Expected returns and win probabilities are calculated from patterns matched in these stocks over the past year and performance assessed as from the open price the day after the pattern completes. The Average Return per Trade is an expected long(er)-term return based on the use of a trailing target and stop (Average Return Per Trade assumes an initial stop of 10%, raised to 5% off the price reached on a 15% gain. Ultimate Profit Target of 25%).

After Wednesday's big gains, PatternDNA outlook for Thursday and Friday is more of a coin toss. Cognizant Technology Solutions Corporation (CTSH) has a bearish outlook for the coming couple of days, with a 70% probability for a lower close Thursday (off Thursday's open price, not Wednesday's close).

Better is the outlook for next Wednesday's close. Apple (AAPL), Vale S.A. (VALE), Baidu (BIDU), Research in Motion (RIMM) and Barrick Gold (ABX) all have a 60% probability or more for a higher close (from Thursday's open price). With the Median projection across the eight stocks suggesting a bullish outlook for next week.

PatternDNA analysis of the long(er) term trade outlook employing a trailing stop strategy (initial stop of 10%, raised to 5% off the price after a 15% gain, ultimate profit target of 25% assuming trail stop not hit) offered an average return per trade of 5.1% for Research in Motion (RIMM) off 62.5% trade winners (winning trades took home 12.5%, losing trades -7.2%) and 5.0% for Free McMoran (FCX) from 67.8% winning trades (10.9% on winners, -7.4% on losers). The relatively bullish outlook for Free McMoran ran counter to the lackluster weekly performance projection for this stock.

Why not give your stocks the PatternDNA treatment?



--------------

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Build a trading strategy in Zignals and potentially earn money too; download our Build a Trading Strategy PDF and get selling (and trading) today!

Dr. Declan Fallon, Senior Market Technician for Zignals.com, offers a range of stock trading strategies via his Zignals home page. Each Zignals member has an unique home page which they can share with friends and clients to sell their strategies.

Zignals offers a full suite of financial services including price and fundamental stock alerts, stock charts for Indian, Australian, Frankfurt, Euronext, UK, Ireland and Canadian stocks, tabbed stock quote watchlists, multi-currency portfolio manager, active stock screener with fundamental trading strategy support and trading system builder. Forex, precious metal and energy commodities too. Build your own trading system and sell your trading strategy in our MarketPlace to earn real cash. Read what others are saying about Zignals on Investimonials.com.

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PatternDNA Pattern of the Week: GGFGB

This week's pattern was drawn from Nokia (NOK). It featured four bearish days followed by a bullish day.



What was unusual about this pattern was the poor short term performance, offset by a stronger long term performance.

Match	No. of Patterns	1-day % Win	2-day % Win	5-day % Win	Average Return Per Trade (> 5 day)
Weakest	183	50	54	56	5.1
Weak	137	52	52	58	6.1
Neutral	69	46	43	49	6.6
Strong	24	51	42	33	5.5
Strongest	0	n/a	n/a	n/a	n/a

Given the coin-toss probabilities over the 5-day outlook, bar the 67% probability for a lower close on the fifth day on the Strong Match, it's not a pattern to generate short term interest.

However, when the Average Return Per Trade was considered (Average Return Per Trade assumes an initial stop of 10%, raised to 5% off the price reached on a 15% gain. Ultimate Profit Target of 25%) the performance of the pattern improved. The win percentage of the pattern when applied with the aforementioned risk strategy, ranged from 58% at the Strongest match to 65% at the Neutral match. The latter match also having the Average Return Per Trade.

Using the Neutral match and running a market scan returned 61 matches. One such match was for Marshall and Ilsley (MI).



With the stock trading above its 50-day MA and 200-day MA (and the 50-day MA riding above its 200-day MA) there is good reason for Marshall and Ilsley to be one of the 65% to close in profit (and if it is, the average return from winning trades is 13.4%).

Learn more about PatternDNA

Zignals PatternDNA from Declan Fallon on Vimeo.

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Get the most with PatternDNA

With the launch of PatternDNA what can our latest application offer you?

What does PatternDNA offer?

The application works on a number of different levels. In default mode it offers an assessment of probable performance in the current 5-day trading pattern for a given stock, commodity or currency pair. For example, the outlook for MSFT based on the past 5-days trading is as follows:

How are these figures calculated? The trading pattern of the past 5-days is compared to similar patterns (based on the Match Level) in stocks drawn from the selected stock list (in this case 18 U.S. stocks).

In the above case, this pattern closed higher 64% of the time on the next day close, but ultimately the pattern led to a lower close 77% of the time after five days. So while MSFT stands a good chance of closing higher today, there is a stronger chance that by this time next week it will finish below $27.03.

But what of the "Pattern & Stop" figures? This takes aspects of the TradeTimer (and Strategy Builder) and measures the cumulative return of the Pattern over the look back period, in this case the previous 12 months. So, if you traded this Pattern using an initial 15% Target and Stop, with a Trail Target and Stop of 10% and 5% respectively for a goal of 25% you would look to make an average return of 8.7% trading this Pattern in the 18 stocks of the stocklist over the previous 12 months.

If you click 'List Results' you can view how the Pattern performed for the listed stocks. In the case of MSFT the matched Pattern in May brought a 4.8% return.

The 'List Results' will give you an idea of the range of expectation. For example, the single match for CSCO in April 2009 led to a 14.2% loss, but the five matches in AAPL offered a 39.8% gain!

What else can PatternDNA do?

PatternDNA is a dynamic application to help you find trading opportunities in the market. You can look at a chart and select patterns up to 10-days long. You can then search for similar matches in the S&P500. You can also create your own Pattern sequence using the letters.

The new Pattern we have selected had 12 matches in our 18 stocks using a 'Neutral' match level. When used with out Target & Stop strategy the average annual (cumulative) return was 9.5% with a staggering 87.5% win percentage. If we notched the match level to 'Strong', the number of Patterns found dropped to 3, but all 3 of these Patterns were profitable with an annual cumulative return of 16.6%.

What is also interesting about this Pattern is the short term 1-, 2- and 5-day performance is poor. As a 'Neutral' match, the Pattern closed higher only 27% of the time after a day and 33% after five (out of a sample 12 matches). As a 'Strong' match the next day closed only higher 11% of the time and was still down in 84% of cases after five days (out of a limited 3 matches).

But isolating a good Pattern is only half the story, next you need to Scan the Market to find them. Scanning for the Pattern, "GEGJBCEIJF", using a 'Strong' match returned just one hit - BMY.

Even in this case, three of the past four matches in for this Pattern in BMY closed in profit, so there is a precedent for a positive return.

But PatternDNA does more!

If you have a profitable Pattern you will want to be alerted when it happens again. You can do this by Saving your Pattern and using this saved Pattern as a rule in the Strategy Builder. When the Pattern occurs in the list of stocks on which your strategy is built, you will get a signal alert.

So PatternDNA offers three quite unique functions: [1] As a metric for measuring performance of a stock going forward, [2] To create and search for Patterns in the market and [3] A tradable signal around which a trading strategy can be built.

Try it out today with our free Preview; upgrade and get PatternDNA plus TradeTimer for just $10 a month.

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Build a trading strategy in Zignals and potentially earn money too; download our Build a Trading Strategy PDF and get selling (and trading) today!

Dr. Declan Fallon, Senior Market Technician for Zignals.com, offers a range of stock trading strategies via his Zignals home page. Each Zignals member has an unique home page which they can share with friends and clients to sell their strategies. Zignals offers a full suite of financial services including price and fundamental stock alerts, stock charts for Indian, Australian, Frankfurt, Euronext, UK, Ireland and Canadian stocks, tabbed stock quote watchlists, multi-currency portfolio manager, active stock screener with fundamental trading strategy support and trading system builder. Forex, precious metal and energy commodities too. Build your own trading system and sell your trading strategy in our MarketPlace to earn real cash. Read what others are saying about Zignals on Investimonials.com. JOIN US TODAY - IT'S FREE!
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Seeking Alpha PatternDNA: (Apple) AAPL

Apple's rapid afterhours fall from Grace despite the Numbers highlighted the vulnerability of believing the hype.

The Zignals Seeking Alpha PatternDNA read of Apple's projected price action at the market close (before the release of earnings) was far from encouraging.

Looking at a summary performance for the 5-day Trading Pattern (available in the free version of the software) with the Default Targets&Stop settings; 15% Target, 10% Stop + Trail 10% Target, 5% Stop and 25% Profit Target there is clear downward pressure, even using a 'Neutral' Match setting.

What is clear, in the 'Strong' and 'Strongest' Match, the Pattern lead to an initial loss of 10% before a 15% gain. Lowering the initial Target from 15% to 5% (requires Premium version) failed to change the performance of the Pattern at 'Neutral' settings or higher. So it's clear the weak performance of the Pattern was not because of an ambitious initial Target price.

PatternDNA offers another take on potential price moves going forward, and can be especially useful when price-moving unknowns, like upcoming earnings, lie in wait. You can quickly get a summary view of this information from the widget while viewing the stock-home page in Seeking Alpha.

PatternDNA is one of the fastest adopting Apps in the SeekingAlpha App store with 466 current users - why not get yours today!

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