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Special Case Momentum
Apr 10, 2005 - The gains from a simple momentum strategy are economically insignificant. However, conditioning the momentum strategy on with some other rules provides very large returns...
Education The gains from a simple momentum strategy are economically insignificant. However, conditioning the momentum strategy on with some other rules provides very large returns. Mahesh Pritamani and Vijay Singal find substantial under-reaction for earnings announcements, analyst recommendations, and earnings forecasts, especially when the volume was high. If there is a large price change and a large volume increase associated with these events, then the subsequent abnormal returns are large. In the event is positive and the volume is high, there is on average a subsequent 3.5% 20-day abnormal return. If the event is negative and the volume is high, there is an average subsequent -2.25% 20-day abnormal return. The authors find that substantial post-transaction cost abnormal returns may be captured using this strategy. Reference: “Return Predictability Following Large Price Changes and Information Releases” Mahesh Pritamani and Vijay Singal, Journal of Banking and Finance, April 2001, Volume 25, No. 4 Analyses of HOLDRs BBH: Bullish above resistance. (Biotechnology)
SwingTracker
BDH: Neutral. (Broadband)
BHH: Neutral. (Business to Business)
EKH: Neutral. (European Stocks)
HHH: Neutral. (Internet)
IAH: Neutral. (Internet Architecture)
IIH: Neutral. (Internet Infrastructure)
OIH: Bearish. (Oil Services)
SwingTracker
PPH: Bullish. (Pharmaceuticals)
SwingTracker
RKH: Neutral. (Regional Banks)
RTH: Neutral. (Retail)
SMH: Neutral. (Semiconductors)
SWH: Slightly bullish. (Software)
SwingTracker
TTH: Neutral. (Telecommunications)
UTH: Neutral. (Utilities)
WMH: Neutral. (Wireless) ...thanks
for the trust you've shown in me and my business.
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Disclaimer: Please note that charts and commentary provided by the moderator are for educational purposes only. Any trades placed upon reliance on the moderator’s charts or information is taken at your own risk for your own account. Past performance is no guarantee of future results. While there is great potential for reward trading stocks, futures and options, there is also substantial risk of loss and you must decide your own suitability to trade. Future trading results can never be guaranteed. This is not an offer to buy or sell stock, futures, options or commodity interests. Most trading systems are based on historical formulas which have worked in the past. However, what has happened before may or may not happen again. You can lose all your money trading stocks, futures, and options and you must decide your own suitability as to whether or not to trade. Only trade with true risk capital you can afford to lose. Only trade markets you can properly afford to trade. Properly funded trading accounts typically perform better than those that are not. Never risk more than 2-3% of your account on any one trade. Always define your risk before entering a trade and place a stop to limit your risk. There are no guarantees or certainties in trading. Trading involves hard work, risk, discipline and the ability to follow rules and trade through any tough periods during a system’s draw downs. If you are looking for a guarantee, trading is probably not for you. Most people lose money trading. One of the reasons is that they lack discipline and are unable to be consistent. A system can help you become consistent. Ironically, worrying about the monetary aspect of trading can contribute to and cause a trader to make trading errors. Therefore, it is important to only trade with true risk capital.
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