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Stock Investment The rate of change (ROC) is essentially similar to the MOM and can also be used for spread timing as explained in this chapter. The chart in Figure 9.5 shows the spread price at the top and the 28-day momentum indicator at the bottom. I have also shown two dashed lines that represent the entry, exit, and reversal points for the spread. The top dashed line is the point near which to exit the spread and/or reverse it while the bottom dashed line is the point near which to exit the spread and reverse in the other direction. This is a very simple application of spread timing. As you can see, the upper and lower dashed lines did a very good job picking reversal points for the spread at A through I. Clearly, the approach is not perfect, but it does offer considerable potential for timing spreads in SSFs. Another approach to spread timing is to combine the MOM with its moving average. This method, which I call the MOM/MA, can pinpoint timing turns more accurately and isn't dependent on the upper and lower boundaries of the spread as sell and buy points. Figure 9.6 shows the Biogen (BGEN) versus IDEC Pharmaceuticals (IDPH) spread with momentum moving average timing. How to Trade the New Single Stock Futures FIGURE 9.5 The GM versus F Spread with a 28-Period Momentum
Eun Jurt-SD 2032 I 1.17.11 FIGURE 9.6 Biogen (BGEN) versus IDEC Pharmaceuticals (IDPH)
9 / Spread Trading in Single Stock Futures 109 I have not provided an exhaustive review of timing indicators that may be used with spreads. My goal in this chapter has been to familiarize you with spreads in SSFs along with showing that they can be highly profitable, with lower or higher risk depending on whether they are intramarket or intermarket spreads. I've also wanted to emphasize that you can use technical timing and/or fundamentals to take advantage of SSF spreading opportunities. For more information on the indicators discussed in this chapter, I refer you to my books, The Compleat Day Trader (McGraw-Hill, 1995), The Compleat Day Trader II (McGraw-Hill, 1998), and Momentum Stock Selection (McGraw-Hill, 2000). Trading software programs have the MOM as one of their featured indicators. stock investment ~ forex signal |
