Taiwan (TWSE) Bollinger Band Buy Signal
The percentage of Taiwan Stock Exchange (TWSE) Index members trading below their respective lower Bollinger Band registered a mean reversion buy signal at the close of trading on 8/26/21.
My colleague, Jay Kaeppel, is fond of saying, "trading essentially comes down to two steps."
- Spot Opportunity
- Exploit Opportunity
Taiwan has been one of the best places around the globe to spot and exploit opportunities since the pandemic low. When someone has a hot hand, keep feeding them the ball.
PERCENT BELOW LOWER BOLLINGER BAND BUY SIGNAL
The Bollinger Band signal seeks to identify when the percentage of Index members trading below their respective lower Bollinger Band cycles from a high to a low level, and Index momentum turns positive. The model will issue an alert based upon the following conditions.
SIGNAL CRITERIA
- Percentage of members cross above 39. i.e., the reset
- Percentage of members cross below 0.5
- If Condition1 and 2, start days since true count
- If Days since true count <= 15, and the TWSE Index 5-day rate of change is >= 2%, then buy.
Data Source: Bloomberg
Let's take a look at the current chart and historical signal performance.
CURRENT DAY CHART
HOW THE SIGNALS PERFORMED
Results look good in the 2-4 week timeframe. I would also add that the four-week period has registered ten consecutive winning trades.
In a note on Tuesday, I shared an additional Bollinger Band system that seeks to identify a low volatility capitulation opportunity. If you want to learn more about the concept, please click here.
While Taiwan (TWSE) did not register a new signal on the most recent correction, I thought I would provide a chart and signal performance as the concept works well on the TWSE Index.
CURRENT DAY CHART
HOW THE SIGNALS PERFORMED
Results look excellent.