Can algorithms predict gap-up stocks?
I've been trying to find a systematic way to identify stocks that gap up in the morning and at first, it seemed like an impossible goal. Recently, I have identified a few key characteristic of gap-up stocks and the goal of this post is to test my theory.
The hypothesis:
1) low float. It has to have less than 20M shares available for trading.
2) RSI values have to exceed 90 in either 1min, 3min, 5min, or 10min chart the day before.
3) Be under the 200MA in the 1minute chart. 200 periods for the 1min chart is roughly 3 1/2 hours.
4) Has to have the propensity to either gap up or gap down.
And finally, there are three reasons why a stock will gap up. One of the pathways is through momentum; as in people panic buying throughout the day and then into the after hours trading. The other pathway is after a day of panic selling. The last pathway is from news.
After this test, I will test some more. If VTVT ends up gapping down, it will prove that indicators are bad at predicting gap-ups but great at predicting gap-downs.
I've been trying to find a systematic way to identify stocks that gap up in the morning and at first, it seemed like an impossible goal. Recently, I have identified a few key characteristic of gap-up stocks and the goal of this post is to test my theory.
The hypothesis:
1) low float. It has to have less than 20M shares available for trading.
2) RSI values have to exceed 90 in either 1min, 3min, 5min, or 10min chart the day before.
3) Be under the 200MA in the 1minute chart. 200 periods for the 1min chart is roughly 3 1/2 hours.
4) Has to have the propensity to either gap up or gap down.
And finally, there are three reasons why a stock will gap up. One of the pathways is through momentum; as in people panic buying throughout the day and then into the after hours trading. The other pathway is after a day of panic selling. The last pathway is from news.
After this test, I will test some more. If VTVT ends up gapping down, it will prove that indicators are bad at predicting gap-ups but great at predicting gap-downs.
Comment:
Here, I've compiled before and afters of gap ups. It appears that it may take up to 7 days when the first signs appear. After experimenting with RSI, I switched to CCI because the signatures are more distinct. RSI is mostly noise.
BEAM before with red/blue/lasers/rsi
BEAM after
DNLI blue/white/cci/pink
DNLI after
JOB blue/red/lasers/black/CCI
JOB after
VXRT blue/white/black/pink/cci 655
VXRT after
NVAX CCI -622
NVAX after
Comment:
This is VTVT currently. The only thing missing is "white stuff". Otherwise, all the necessary conditions are there; including jacked CCI readings of 500+ and a -500 CCI as well-- which is unusual.
It may take as short as 2 days from where the CCI spiked --- up to 8 days for the gap up. Where it took 8 days to gap, it was a 200% gap.
It may take as short as 2 days from where the CCI spiked --- up to 8 days for the gap up. Where it took 8 days to gap, it was a 200% gap.