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Meanreversion

Power generators look poised for relief as O&G prices fallA Mean-Reversion Play Power generators like NRG and PNW have been quite beaten down lately, mostly because of surging oil and natural gas prices as we head into winter. NRG is .8 standard deviations below its mean, with 82% upside to its median price multiple of the last 3 years. PNW is currently trading about 3 standard deviations below where it usually trades in relation to its 200-day EMA, with 29% upside to its median price multiple of the last 3 years. In my opinion, NRG has more attractive fundamentals, but PNW has the more attractive chart. PNW looks particularly ripe for mean reversion here. Fundamentals NRG trades at less than 4 price to free cash flow (P/FCF), which makes it a really good value here. It has a forward P/E below 5 and a forward P/S below .4. S&P Global gives its fundamentals an average score of 87/100, and it has an average analyst rating of 8.7/10. It has 28% upside to the average analyst price target. Of the stocks I follow, NRG's price ratios are in the 92nd percentile, and its price-growth ratios are in the 62nd percentile. So it's cheap on both an absolute basis and when you factor in its rate of growth. PNW's fundamentals are less attractive. The company has been cash flow negative for a couple years. Its price-to-earnings ratio is just under 14, and its price-to-sales ratio is just under 1.9. Its dividend yield is higher, at 5.4% vs. NRG's 3.8%. But it needs to generate cash flow in order to sustain that dividend. PNW's ESG score is really high, at 2.75/3. It gets just a 35/100 fundamentals score from S&P Global and a 4.7 average analyst rating, however, and it has only 7% upside to the average analyst price target. Relative to the other stocks I follow, PNW is expensive, in the 26th percentile for price ratios and the 11th percentile for price growth ratios. So this is probably not a long-term hold for me. Open Interest a Contrarian Indicator Open interest from options traders on NRG is quite bullish, with put/call ratio at 0.6. Open interest on PNW is bearish, with a put/call ratio of 1.4. However, I've recently done some back-testing and discovered that open interest is actually a contrarian indicator in recent data. So the bearish open interest on PNW actually implies a better short-term return. The extremely negative z-score I mentioned in the first paragraph also tends to be correlated with high returns in my back-testing. So my algorithmic trading account has gone pretty heavy on PNW, whereas in my discretionary account I am overweight NRG. The Catalyst Power generators have recently gotten crushed due to rising natural gas and oil prices, not to mention uranium. Because power generators are so heavily regulated, it's really hard for them to pass rising fuel costs along to their customers. However, natural gas prices are down sharply off their highs, and oil and uranium both pulled back a bit today: If this continues, power generators may fly. NRG looks to be finding some support, and I particularly liked the price action in PNW today. Both NRG and PNW are coming off better-than-expected earnings reports, but NRG's results excluded some large costs related to winter storm Uri, and PNW reported several very unfavorable decisions from Arizona regulators. Part of the reason for NRG's outperformance is that it was well hedged against rising fuel costs. NRG announced that it will raise its dividend by 8% in the first quarter of 2022 and that it is paying down debt at a pretty impressive rate as it works toward an investment-grade credit rating. NRG paid down $255 million of senior notes through September 30, 2021 and plans to continue reducing its senior notes balance through 2023. This is just a really well-run company, IMO, which makes it a good long-term hold.
NYSE:NRGLong
by ChristopherCarrollSmith
5
#GBPUSD long opportunityAs I said a few days ago there is a good potential for GBPUSD bullish move, and since then price has formed a falling wedge which eventually broken to the upside on Friday. Because of the chart pattern bullish breakout, now we could look for buying opportunities, specially any pullbacks to our falling wedge. Right now price is forming a bearish corrective move in 1H and 4H time frame. As a result I'm looking for lower time frame structure change to the upside and open a long position on this pair. Keep in mind price can easily return to the wedge and manage to stay bearish for quite some time.
Long
by mohemati
2
$PTON LONG VWAP/Average Price Analysis#PTON Average price ever paid for this stock was $79.04. Average VWAP price ever paid for this stock was $83.44. The earnings gap down happened at the same time many institutional portfolios rebalanced for years end, you can see this on many other stocks in early November. Mediocre but not bad earnings with increases in subscription services and with most money being reinvested into RD and marketing PTON is here to stay regardless of what others think with a great PEG ratio of -.03 indicating very undervalued. The next major demand zone is at 39$ the next major supply zone is at 80$ right where that average price ever paid is sitting. The likely move is a retracement test into that 39 demand zone and then a parabolic move back into that gigantic gap between $55-$80. Don't you think some orders might have been left in that massive gap? Current accumulation/Distribution volume indicates holdings equal to late September 2020 when the stock was at you guessed it the $80 range. Great play with the potential to double in price over the next 6 months to year. My choice would be JULY 2022 calls.
NASDAQ:PTONLong
by MarketMastered
EURJPY SHORT (Mean Reversion)Confluences: 1: Stop loss hunt at previous high on weekly level plus a breakout. 2: Price heading towards high of the June(2021) which is an important supply zone with many retail stops. 3: Price has been moving very quickly which signals an over extended market for the pair. Summary: Price is currently over extended and has been moving in a up trend for 2 almost weeks straight. We are looking for a potential stop hunt at the high of June where many retail stops may be sitting. There's is a potential for strong mean revision to take place allowing big players to hunt some stops and grab some liquidity before we see a continuation to the upside in a few weeks to come. This trade is expected run for the next 8-9 trading days or until the target is reached, whichever comes first. Always remember to Buy to the low and Sell the high. We will see how this current weekly candle closes before looking for any entries early next week.
Short
by NDOBObanks
GBPCHF Long (Mean Reversion) with 3X Potential Reason List of Reasons for potential pull back/mean reversion: 1: The market is over extended and has been moving bearish for almost 3 weeks straight with no pull back. This is more visible on the weekly chart than on the daily chart. 2: The trendline on the daily chart was broken with no retest. 3: Month Support level was broken with no retest around the 1.25*** area Summary: The trade has the potential to be a 4:1 RR or more abut this will depend on how deep the pull back is. Targets are set using fib tool. We also have to wait for the market to change from bearish to bull which will be visible on the H4 and Daily chart. Once the market turn bullish, we will then be able to determine the correct RR of the trade. The trade will be left to run until the target is reached or between 5 to 10 trading days, whichever comes first. Those who plan to sell the market in its current state must be very careful as smart money might close short some positions on the pair, forcing price to turn bullish, allowing them grab some liquidity.
Long
by NDOBObanks
GBPJPY SHORT (Mean Reversion)Confluences: 1: Stop loss hunt at previous high on weekly chart. 2: Price heading towards high of the year(2021) which is an important supply zone with many retail stops. 3: Price has been moving very quickly which signals an over extended market for the pair Summary: Price is currently over extended and has been moving in a up trend for 2 weeks straight. We are looking for a potential stop hunt at the high of the year where many retail stops may be sitting. There's is a potential for strong mean revision to take place allowing big players to hunt some stops and grab some liquidity before we see a continuation to the upside in a few weeks to come. This trade is expected run for the next 8-9 trading days or until the target is reached, whichever comes first. Always remember to Buy to the low and Sell the high. We will see how this current weekly candle closes before looking for any entries early next week.
by NDOBObanks
Regressive VWAP Breakout StrategyStrategy type: Breakout Ingredients: Price, Volume, Regression Prerequisite add-ons (free): Regressive VWAP and Strategy Visualizer Target market: CME:BTC1! or BITSTAMP:BTCUSD - Long Entry on Close crossing over Regressive VWAP - Short Entry on Close crossing under Regressive VWAP - Optional: exit when price retraces to upper band (LX) or lower band (SX) The key to this breakout strategy is the Regressive VWAP, which weighs Price and Volume with Regression Analysis, making the slope and its bands more responsive, with a degree of mean reversion. Below is another example, this time CME_MINI:ES1! .
CME:BTC1!Education
by ChartVPS
AUDJPY SHORT (Mean Reversion)Confluences: 1: Stop loss hunt at previous high on weekly level plus a breakout. 2: Price heading towards high of the June(2021) which is an important supply zone with many retail stops. 3: Price has been moving very quickly which signals an over extended market for the pair. Summary: Price is currently over extended and has been moving in a up trend for 2 almost weeks straight. We are looking for a potential stop hunt at the high of June where many retail stops may be sitting. We might see a further push to the upside at the new weeks open. There's is a potential for strong mean revision to take place allowing big players to hunt some stops and grab some liquidity before we see a continuation to the upside in a few weeks to come. This trade is expected run for the next 8-9 trading days or until the target is reached, whichever comes first. Always remember to Buy to the low and Sell the high. We will be looking for any entries early next week. Remember to always buy the low and sell the high.
Short
by NDOBObanks
Diversify your strategyThe holy grail of diversification is to find several uncorrelated asset classes all with positive returns. One problem, though, is that diversified passive investing has caused all asset classes to become more and more correlated over time. Increasingly, you see stocks, bonds, commodities, and cryptocurrencies all move together. One approach to diversification that's increasingly popular with quants is to diversify your strategies rather than your asset classes . Long-short strategies are a popular example. Almost by definition, your short strategies will make money when your long strategies lose money, and vice versa. The challenge of making this work is that it's really hard to design short strategies with positive expected return. Since the market tends to go up over time, playing the market short is a bit like betting against the house at a casino. If you find a short strategy that actually works, that's gold right there. Fortunately, there are some relatively uncorrelated strategies that work for long-only traders. This chart shows the Invesco "Momentum" and "Pure Value" ETFs. As you can see from the red and green arrows, the two ETFs often move in opposite directions. When one is producing positive returns, the other often isn't. Owning both can help smooth out your drawdowns and returns. The same can be said for "mean-reversion" and "trend-following" strategies. Mean-reversion strategies involve buying assets that have made a big move downward. If you bought China stocks after their recent huge-selloff, that was a mean-reversion trade. Trend-following strategies, by contrast, involve buying assets that have made a big move upward. If you've bought oil and gas stocks in recent weeks, that was a trend-following trade. Both strategies tend to "work," but again, they're somewhat uncorrelated. These strategies can further be broken down into short-term and long-term versions. Oil and gas is in a short-term uptrend, while the Nasdaq index is in a long-term uptrend. Facebook and Bristol-Myers Squibb are a short-term mean-reversion candidates after their recent sell-offs, while Calavo Growers and Regis Corporation are long-term mean-reversion candidates. The nice thing about using a mixture of short-term and long-term signals is that they allow you both to profit from stable market conditions and to quickly pivot at least some of your capital when market conditions change.
MEducation
by ChristopherCarrollSmith
Idea: How to "wait and see" before jumping into this tradeCurrently watching TSLA because of the hype over Q3 earnings (to be announced). About this setup: - Investment horizon: Medium term (i.e 2 weeks to a month). - Timeframe: Daily chart - Strategy used for backtesting: Mean Reversion (ATR) Strategy Idea: Using Price by Volume Histogram to find current support. Also, we want to mimic the initial point of entry signalled by the Mean Reversion (ATR) Strategy algorithm. Scenario: Price is currently 843; should have entered at 733 following the algorithm. It's too late now, but still waiting to enter the trade. Setup: Using the built-in volume profile tool, set the range starting from the hypothetical point of entry (Sept. 20) extending it up to the current bar (Oct. 15). The red line is the POC developed over time. In theory, it approximates the moving average of price weighted by volume. This arguably provides more meaningful information compared to simple/exponential moving averages because (a) it takes volume into account, and (b) and it sticks to the defined fixed range of period drawn on chart. Other points to note: - 70% of the price distribution is between 762-816 (non-transparent area of histogram); price is currently above, so we assume TSLA is overbought. - the discrepancy between current price and red line is due to lack of volume. If more buyers come in, the histogram will be skewed upward (actually to the left, if looking from correct side), and the red line (POC) will also rise up. - POC has been horizontal at 780 since period of consolidation that began on Sept 28. We define this as the area of support. - POC stands for "point of control", it's the longest bar of the histogram. Stage 1: Do nothing. Just wait. Stage 2: Enter at area of support. - Scenario 1: later, if price rises to 860 (i.e as per 12month target price set by analysts at Goldman) => Tighten your trailing stop loss and/or start taking profits. - Scenario 2: later, if hits stoploss placed below area of support during a selloff => Accept the loss, wouldn't be surprised if we revisit prior supports ranging between 680-720 Other notes: - there are at least 8 analysts covering TSLA; their targets range between 120 to 1200. (Source: NASDAQ ER summary ) We used GS's 860. - this is not an investment advice, it's just a thought process
NASDAQ:TSLALong
by DojiEmoji
1
Situational Fluency | Are Markets Favorable For My Strategy?You may have heard the adage, make hay while the sun shines. In market terms, we might translate this to ... make (the most) money when conditions are favorable for your strategy. The recent increased volatility yesterday, and last Monday 9/20, also increase the probability that range days will follow. In this video, I take a look at a VWAP Bands strategy (Stay IN Your Lane) that does very well under these conditions. The primary indicator for the strategy shown in the video is called " VWAP Stdev Bands v2 Mod UPDATE" and is available in the public library on TradingView.
CME_MINI:MESZ2021
by RodCasilli
4
API3: Trend Continuation Analysis with TargetsAPI3 appearing to find support on well correlated uptrend. Anticipating support at -2 standard deviations (SD) below regression trend mean to hold. Watching for either a mean reversion, break above, and retest for bullish confirmation or break below -2 SD for exit. Analysis: Price Currently price action is ranging between $4.75 resistance corresponding well the POC for volume profile (blue line), and $3.99 support level just above Fib 23.6% retracement pulled from ATH to local low. Pink dashed lines on chart are areas of significant support/resistance as determined through analysis of multiple fibonacci pulls or simple S/R identification. RSI RSI currently sitting at neutral level of 51 needs to stay above 38, ideally looking for a cross and close above 55 in the next day or two for confirmation for bullish continuation. ADX/DI Increasing bullish trend though weakening slightly MACD MACD still in bullish territory above zero line. Though it appears to be nose-diving with a trajectory towards a zero-line cross, price action appears to be diverging from this move downward and MACD is starting to curl up. The trade: Entry: $4.17 TP1: $6.00 TP2: $7:00 Stop (Mental w/ alerts): $3.779 RR: 4.7 An ascending triangle has been drawn using the -2 SD of linear regression trend and the POC of volume profile/resistance. Watching for bullish breakout of this triangle. If PA breaks down out of the triangle I will be watching for support at stop-loss area at $3.779. This stop will be a mental stop-loss with alerts as I will want to see a Daily candle close below this before exiting trade to avoid getting whipsawed. If price closes below stop, trade will be exited and will reevaluate entry watching for support from identified areas (dashed pink lines). -Spreck
Long
by spreck
1