Rules-Based Strategy Update: Stocks on the Move September 2018
The Stocks on the Move strategy is based on the book by Andreas Clenow, aptly titled Stocks on the Move. It is a momentum based system that calculates the statistical slope and regression for all the stocks in the S&P 500. The top momentum stocks are held and replaced each week depending on the rules of the system.
In last month’s update and the strategy summary, I said I was not going to trade this strategy and would be tracking a modified version. However, I have changed my mind and will be in fact trading this system and using it in my own personal account. As a result, starting in October the updates for this strategy will be as I trade it which is closer to how the book does.
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Stocks on the Move Rules-Based Investing
As a reminder, this portfolio trades based on specific rules that tell the investor what stocks in the S&P 500 to buy and when. Here are the rules of the strategy (but keep in mind the tweaks of how I manage the portfolio as per above).
- Determine Market Trend. Buy only if S&P500 is trading above 200 day moving average.
- Calculate momentum scores for each of the stocks in the S&P500.
- Disqualify any stocks that are trading below their 100 day simple moving average.
- Disqualify any stocks that have gapped up or down 15% in the past 90 days.
- Build initial portfolio with the strongest trending momentum stocks in the S&P500 using position sizing method.
- Rebalance portfolio weekly by recalculating momentum and sell any stock that has moved below its 100 day moving average, is no longer in the top 100 momentum stocks, had a 15% gap up or down, or has left the S&P 500. Replace those stocks with next highest momentum stock.
- Rebalance positions bi-weekly to correct position sizing amounts
This system does take some work to calculate the statistics required to rank the stocks. I have been able to replicate that in TC2000 so the calculations are done automatically for me (including position sizing).
Monthly Signals: Stocks on the Move Investing
Each month I generate the signals for the portfolio using TC2000. If you want to give TC2000 a try in order to generate the signals for the strategies on Robotic Investing, then use this link for $25 off.
As mentioned above, I am going to initiating this portfolio shortly in my own account. As a result, the signals and results presented below will change going forward.
One of the rules is that the S&P 500 must be trading above its 200 day moving average in order to make any buys. The S&P 500 is above that level so the system is free to trade.
Using TC2000 to do the stock ranking, here are the results for September 2018. You can see I have flagged any stocks with a 15% gap as well as any stocks that are trading below their 100 day moving average.
Strategy Tracking & Performance: Stocks on the Move Investing
Here is the portfolio tracker and performance chart for Stocks on the Move. I use the Morningstar Portfolio Tracker to track all the systems at Robotic Investing. As you can see the strategy lagged the S&P500 a bit over the month, but let’s give it more time to see how it really does.
Each of the portfolios tracked use a hypothetical $50,000 starting value. This portfolio was started on August 1st, 2018.
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