Using IBD Stock Ratings as a filter

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Jason Czech
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Using IBD Stock Ratings as a filter

Post by Jason Czech » Wed Aug 06, 2003 11:09 am

Does anyone here have experience with using Investors Business Daily (IBD) & their stock rating system?

I'm trying to use a variation of Mark Johnson's PGO system applied to stock trading, but running into the obvious problem of receiving more trading signals than the system is able to handle when I apply the system to the 3000 or so (reasonably) liquid US Stocks.

I think a secondary filter on fundamental data may be a good option, but I've been unable to find historical fundamental data at a reasonable price.

I recently came across http://www.investors.com and found their method of rating stocks interesting. I'd love to be able to backtest incorporating their ratings, but unfortunately they don't allow downloads of archived issues of their paper - so no backtesting. I may just subscribe for a few years & save all the digital copies...but I'm wondering if anyone else here has any comments on the quality of their ratings?

Jason

trendguy
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IBD's database

Post by trendguy » Wed Sep 03, 2003 12:59 am

IBD does not give traders access to their database which makes backtesting next to impossible.

The main reason why I believe O'Neil is so successful is because he does an excellent job of sizing up the overall "MARKET" trend. Once he knows the market has followed through and entered into an uptrend it is a lot easier making money buying stocks, generally his tests show that 75% of all stocks rise in a bull market which makes for many high probability trades.

His system is basically a breakout system which works very well in uptrends/bull markets.

Chuck B
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Post by Chuck B » Wed Sep 03, 2003 7:51 am

Yeah, IBD has "been long" for many months now. They've posted some letters to the editor where people berate them for "being long" -- the last one was after the mild pullback of the Nasdaq in early August. Some guy wrote in gloating that he was "right" not to follow their advice or some such thing. From the day of that letter, the ND 100 is up over 150 points :D . Amazing how many people out there must be "fighting to be right" on a continual basis or fighting to prove others wrong :?: .

We should be getting close to the point where we suck in the masses real soon...this should be fun too. :D

billpritjr
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IBD Group RS

Post by billpritjr » Wed Sep 03, 2003 11:33 pm

A few years ago I was an avid IBD/CANSLIM proponent however I am now completely aligned with TA. IBD is a combination of "pattern formations" (Cup with Handle), volume analysis, and Fundamentals (however O'Neil does not use PE ratios).

I find the Group Relative Strength rating as very useful, when say, a group of 5 stocks all equally look attractive. I would go with the one with the higher Group RS.

In a "reverse psychology" type of strategy, be aware that MANY institutions subscribe to O'Neil data. So if a highly rated O'Neil stock is headed up, and another one also is headed up, you might go with the O'Neil stock, since "the crowd" is likely more behind that one.

As an example, UTSI was rated A/A/A/A with Group RS 99, and IBD overall 99, in March this year, and its MA's crossed, and I bought it, and subsequently it returned 100%+ to date.

Just my 2 cents

Forum Mgmnt
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Post by Forum Mgmnt » Thu Sep 04, 2003 10:31 am

The best filters for a trend-following approach to stocks are either arbitrary ones, i.e. pick a group of 50 stocks you want to follow that is reasonably well diversified, or simple ones based on strength.

A simple but reasonably effective strength filter is to determine the number of ATR that a given stock has gone up or down in the last year (250 trading days) based on the ATR 250 days ago.

I believe it would be much better to do this on a sector basis, first ranking sectors and then ranking stocks within a sector. This is one of the most promising tests on my to-do list.

- Forum Mgmnt

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