Oversold in an Uptrend

This system uses Wilder’s Relative Strength Index (RSI) and volatility to detect oversold stocks in an uptrend and tries to buy at the bottom hoping to profit from the inevitable rebound.
To establish whether the stock is in an uptrend I used Linear regression, my custom Volume flow Indicator and a number of other conditions. In the following example below the system detected on the 5th of February 2018 that Adobe (ADBE) was oversold in an uptrend. As you can see the stock was up more than 11% during the next 2 weeks

DOUBLE BOTTOM & DOUBLE TOP

Overbought in a Downtrend

This system will detect overbought stocks in a downtrend and tries to go short at the top (hopefully) to profit from the reversion to the previous trend. In the following example below the system detected on the 22nd of February 2019 that Delphi Technologies (DLPH) was overbought in a downtrend and triggered a short signal.

As you can see the stock was down more than 20% during the next 14 days.
Both systems were designed for daily charts and are available for the Amibroker and Metastock platforms.

OB IN A DOWNTREND

PERFORMANCE

chart formation systems

Test Parameters

Test date: March 6th, 2020
Commissions : 1 cent per share
Trade amount per stock: $25000 with no margin or compounding.
Initial capital: $150,000