When SPY Closes Near The Bottom of Its Range But Still Positive

Last Updated on November 21, 2020 by Oddmund Groette

During my early days as an investor/trader in the early 90’s, I was told (in many books) that an up day that finishes near the low of the range is a bad sign. However, it’s always a good idea to test everything yourself. Rob Hanna did that in 2010 and I decided to check the results myself. Here is the strategy:

  • (c-l)/(h-l) (the IBS) must be lower than 0.1.
  • Today’s close must be higher than yesterday’s.
  • If the above conditions are met, then enter on the close.
  • Exit on the close after 3 days.

Here is the result:

% #trades #wins Avg
10.69 14 12 0.76

The test period is from January 2005 until the present. Here is the equity chart:

After Hanna’s study, this setup has occurred 4 times until the present with these trades: 0.17%, 0.9%, 0.7% and 1.52%. Few trades, but very profitable.

However, setting a higher max on the (c-l)/(h-l) criteria gives a bit more erratic picture. With this indicator set at max 0.33 we get this equity chart: