Thursday, March 24, 2011

BAT Computer Results for Thursday March 24, 2011

The market made a nice move today, finally on higher volume. Reading the candlestick pattern indicates that we have re-penetrated the level we broke through at the beginning of the Japanese crisis. The next week should be interesting.
(Click on image for full screen)

Wednesday, March 23, 2011

10 Stocks showing unusual volume with no price movement...yet

One of the most popular sayings you'll hear in Investing 101 is, 'Volume leads price', and rightfully so, this statement has a lot of truth to it. Often times institutions, hedge funds, or large groups of retail investors will begin buying shares of a company that they have some belief will rise in price. Sometimes there will be an abundance in supply of the shares however, and the initial buying surge won't cause an immediate rise in price.  Nonetheless, as the market adjusts, whether it be though continued buying pressure, or a lack of supply in shares at the next-nearby price levels, the stock will rise.

The key to exploiting these situations is identifying these pre-price volume surges. The laws of statistics give us an extremely straightforward and simple way to do this. Standard deviation (STD) tells how much an occurrence of a certain value varies from its mean value. For a stock price, its price change STD tells us how much price changes vary around its mean value, usually zero. For volume it tells us how much the volume changes from day to day, around its average volume.

However, the most important thing STD tells us is the CHANCE of that value occurring. Most statisticians, and scientists concur that any value that lies 2 STDs away from the mean is a SIGNIFICANT CHANGE. Mathematically, a value only lies 2 standard deviations away from the mean < 3% of the time, quite a rarity!

We can use this information to tell us which stocks are showing unusual volume surges, those that are 2 STDs above the average, or in the + 97th percentile. Unfortunately, most stocks with these rare volume surges have already risen/fallen in price. The key is to add another restriction, only looking at stocks that have less than a 1 STD change in price, a perfectly normal price change.

Below are 10 stock currently showing this abnormal increase in volume, but not yet in price. I have calculated them over 5 day moving averages to smooth it out. I can make no promises that institutional investors are buying, or that the price will rise 100%, but they make for interesting cases you should at lease look at.

         Symbol     Volume STDs above normal      Price STDs above normal 
         SNBC                     18.0386                                  0.0461
         PZZI                         9.758                                    0.2315
         OVRL                      9.2366                                   0.7816
         PSMT                      8.7327                                 -0.5465
         HBHC                     8.0493                                   0.7592      
         HA                          7.0763                                  -0.7769
         GPOR                     6.9729                                   0.3764
         EEI                          6.9287                                  0.6595
         PLAB                      6.348                                   -0.5453
         WTSLA                  6.3226                                  -0.1031

(Note: I will be adding a listing of the top 5 abnormal volume - normal price stocks to the daily BAT Computer report.)
(Note2: These measurements assume Gaussian statistics for stock price movements, a better approximation is a Levy skew distribution, which complicates things and is somewhat unnecessary for this case.)

BAT Computer Results for Wednesday March 23, 2011

The market made nicer gains today via a slow steady rise, again on lower volume. This recovery on lower volume has be a bit worried that the pullback may not yet be over. Stay tuned...

(Click on image for full view)

Tuesday, March 22, 2011

BAT Computer Results for Tuesday March 22, 2011

The market took a small step back today, again on lower volume. The market showed quite a bit of uncertainty via the first measure, and the movement today well reflected that. Again the momentum took a turn down and remained below zero.

Monday, March 21, 2011

BAT Computer Results for Monday March 21, 2011

The markets were impressive today, posting +1.5% or greater gains across the board. The quick response to Libya seems to have gone over well, and the knee-jerk response to the Japanese crisis seems to have settled. The BAT computer shows however, that the gains today happened on slightly less than average volume, which is somewhat worrisome, and the momentum still remains below zero. Nonetheless, a 48 point gain is not too shabby.

(Click on image for full screen)

Sunday, March 20, 2011

Introducing - The BAT Computer Stock Market Analyzer!

I am pleased to inform you that the BAT Computer version 0.9 is now complete! Every day I will post an update screenshot of the program giving you a unique insight into the market. Also, coming soon will be the final component of the computer, a neural network that 'predicts' the movement of the stock market.

For a description of each measure go to the tutorial at

(Click image for full size view)

The BAT Computer - Market Analysis Software (Tutorial v0.9)

(Click image for full size view)

Top Left - 50 day candlestick pattern of the Nasdaq marketplace composite average. Weekends are included unlike most charts because, as you might find, they are important. The 10 day moving average is in red and the 25 day average is in green.

Middle Left - Bar chart of volumes.

Bottom Left - Momentum predictor calculated as,

Momentum = 10 DMA [ (Price Change * Volume) / (Price * Average Volume) ].

Top Right - The price change % and volume represented as standard deviations from the average. Values of 0 imply the average price change % or the average volume. 2 standard deviations away implies that the price change % or volume is in the top or bottom 2 % all time.

Middle Upper Right - Uncertainty calculated two ways.
     Left - (High of day - Low of day) / abs(Price-Opening Price) - 1.
     Right - STD( % Price change of ALL Nasdaq stocks).

Middle Lower Right - Uncertainty calculated two ways.
Heat map of all Nasdaq listed stocks. Positive price changes are in green and negative changes are in red, with the colors maxed out at +/- 5% changes.

Bottom Right

Coming soon! A neural network algorithm to predict the movement of the stock market using the measures in the BAT computer.