A Failed Bounce Is Normally Followed By Rising Prices

Last Updated on June 11, 2021 by Oddmund Groette

Rob Hanna at Quantifiable Edges had an interesting article some days ago about bounces in the S&P 500.

I made some changes to his strategy and ended up with these simple rules:

  1. Yesterday’s IBS (Internal Bar Strength) was at least 0.6 or higher.
  2. Yesterday’s low was lower than the lowest low during the five days before.
  3. Today’s close is lower than yesterday’s close.
  4. Exit when the close is higher than yesterday’s high.

In Amibroker the code is like this:

Buy= ref(ibs,-1)>0.6 AND Ref(L,-1)<Ref(LLV(L,5),-2) AND C<Ref(C,-1) ;
buyPrice= C;
Sell= C>Ref(H,-1) ;
sellPrice= C ;

The result is like this with 200 shares of SPY traded and 100 000 in initial start capital :

The equity chart looks like this (not good from 2018):