Stocks, futures, currencies, and indices tend to have a magic area at the 100, 200, 600, 9300, 12000 and so on levels. You have the next magical level if you can divide the current market value by 100.
Why is this? Is there a gold medal behind these nice round numbers? There is some sort of sense of accomplishment when a stock price (representing a company’s worth), index or currency pair reaches a level that is divisible by 100 and this event is watched closely by many traders.
Stocks also seem to retrace to these magical 100 numbers. We could create a scan or filter that lets us know when a stock gets within 5 points of the 100 mark. You can create several filters for each level divisible by 100.
Rob Roy has created many scans during his trading career and with the basics, you can create a scan on your own trading platform or purchase the WBHQ Trade Navigator charting system and start adding the Rob Roy libraries.
You can then look at each chart to verify the direction and probability of a trade once you have your list of stocks from your filter. Back testing will allow you to have more insight into that stock’s behaviour around a number divisible by 100.
There is some sort of sense of accomplishment when a stock price (representing a company’s worth), index or currency pair reaches a level that is divisible by 100 and this event is watched closely by many traders.
Once we recognize this phenomenon, what should we do? When a stock gets within 5 points of the 100 mark, we could create a scan or filter that lets us know. We could create an entire trading system around this 100s anticipation.
Here is a sample filter:
1. Stock has over 300,000 shares traded daily. You want some excitement in the trading room which creates movement, preferably 500,000 to 1,000,000 shares traded daily.
2. The stock should be preferably weekly and optionable options included.
The Close price would be greater than 95 and less than 100. You can create several filters for each level divisible by 100.
Stocks also seem to retrace to these magical 100 numbers. Know that a market value divisible by 100 will most likely create a psychological support or resistance.