Tuesday, October 28, 2008

Patterns? or Apophenia?

Interesting things happen when you study interesting things. Sometimes you find patterns. Sometimes they mean something and sometimes they are just coincidental. You decide. I have noticed an interesting pattern when it comes to the movement of the GERS stock price. It seems that we are likely to hit our high for the month on either the last trading day of the month or within the first four trading days of the month [5 day period]. This was true in seven of the last ten months: March (2nd), May (1st), June (2&3), July (4th), August (1st), Sept (last), October (2nd)*. If this pattern holds then there is a 70% chance we will see the high for next month either Monday thru Thursday next week or the last trading day of November.

Why does this happen? Is it more volume? No. The highest monthly volume day is only in the noted 5 day period a predictable 30% of the time. None of the highest monthly volume days coincide with high price for the month day.

Is it less volume that causes the higher price? Not really. In 90% of the cases the lowest volume day was between the 9th and the 19th trading day of the month. Only in May was the lowest volume day in the [five day period], and that happened to coincide with the high for that month.

Conclusion
We have increasing been hitting our monthly high on either the last trading day of the month or the first four days of the month. This is less than a quarter of the trading days but has been true 7 of the last ten months - or 70% of the time. It has been true six of the last six months - or 100% of the time. The high price days seem to have a reverse linkage to extreme volume (either high or low volume).

Synchronicity
Am I grasping for any link in my mind and my perceived world of stock price variation? Am I committing a statistical Type I error? Am I suffering from the heartbreak of apophenia? Are apophenia and creativity two sides of the same coin?

Most importantly - will I make some coin in the [five day period] quickly approaching? lolo and as always - make your own decisions and good luck to you.

SkunK

*Only earlier in the year, January (7th), Feb (11th) and April (7th), did we see a substantial deviation from this pattern. The (numbers) above are not the day of the month - but the number of trading days into the month. The high is based on the price at the close. We average 21 trading days a month so the 5 day period the SkunK singled out (last day and the first four trading days) should have by random chance only about 25% of the monthly highs rather than the 70% observed. Whether this signals repeatable human behavior or radom chance is for you to decide. This is published with three days left to trade in Oct.

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