Letters - January 2008

January 2008 Letters To The Editor
or return to January 2008 Contents
The editors of S&C invite readers to submit their opinions and information on subjects relating to technical analysis and this magazine. This column is our means of communication with our readers. Is there something you would like to know more (or less) about? Tell us about it. Without a source of new ideas and subjects coming from our readers, this magazine would not exist.
Address your correspondence to: Editor, STOCKS & COMMODITIES, 4757 California Ave. SW, Seattle, WA 98116-4499, or E-mail to editor@traders.com. All letters become the property of Technical Analysis, Inc. Letter-writers must include their full name and address for verification. Letters may be edited for length or clarity. The opinions expressed in this column do not necessarily represent those of the magazine. -Editor

SVAPO (SHORT-TERM VOLUME AND PRICE OSCILLATOR)
Editor,
I enjoyed Sylvain Vervoort's article in the November 2007 issue of STOCKS & COMMODITIES on the SVAPO indicator ("Short-Term Volume And Price Oscillator"). I use MetaStock for all my technical analysis and am currently using MetaStock 10.
I have entered all the info for the indicator, and I am particularly interested in the code for the MetaStock Expert that you presented in Figure 8. I like your concept of increasing price with increasing volume and then being able to identify the corrections with decreasing volume for the longs and then doing the complete reverse for the shorts.
Can you tell me what the code is that allows the MetaStock Expert to create the single colored arrows in Figure 8?
DJ Vatalero
Sylvain Vervoort replies:
Please note that all arrows on all the charts in the November 2007 article on SVAPO are put on manually just to show the exact coincidence between price and SVAPO turning points. SVAPO is not meant to be used as a mechanical trading system. Please read how I apply the SVAPO in the December 2007 issue of S&C ("Short-Term Trading With SVAPO").
Of course you could create an expert and an explorer function in MetaStock to give you a signal when SVAPO is turning up or down from below or from above the standard deviation line. But please only use it as a trigger to have a look at the chart. Do not use it for any automatic buying or selling!
Here is an expert function for such a trigger:
Up trigger:
haO:=(Ref((O+H+L+C)/4,-1) + PREV)/2;
haCl:=((O+H+L+C)/4+haO+Max((O+H+L+C)/4,Max(H,haO))+Min((O+H+L+C)/4,Min(L,haO)))/4;
period:= 8;
cutoff:= 1;
devH:= 1.5;
devL:= 1.3;
stdevper:= 100;
haC:=Tema(haCl,period/1.6);
vave:=Ref(Mov(V,period*5,S),-1);
vmax:=vave*2;
vc:=If(V<vmax,V,vmax);
vtr:=Tema(LinRegSlope(V,period),period);
SVAPO:=Tema(Sum(If(haC>(Ref(haC,-1)*(1+cutoff/1000)) AND
       Alert(vtr>=Ref(vtr,-1),2), vc, If(haC<(Ref(haC,-1)*(1-cutoff/1000)) AND
       Alert(vtr>Ref(vtr,-1),2),-vc,0)),period)/(vave+1),period);
highdev:=devH*Stdev(SVAPO,stdevper);
lowdev:=-devL*Stdev(SVAPO,stdevper);
Alert(SVAPO<lowdev,2) AND Cross(SVAPO,Ref(SVAPO,-1))
Down trigger:
haO:=(Ref((O+H+L+C)/4,-1) + PREV)/2;
haCl:=((O+H+L+C)/4+haO+Max((O+H+L+C)/4,Max(H,haO))+Min((O+H+L+C)/4,Min(L,haO)))/4;
period:= 8;
cutoff:= 1;
devH:= 1.5;
devL:= 1.3;
stdevper:= 100;
haC:=Tema(haCl,period/1.6);
vave:=Ref(Mov(V,period*5,S),-1);
vmax:=vave*2;
vc:=If(V<vmax,V,vmax);
vtr:=Tema(LinRegSlope(V,period),period);
SVAPO:=Tema(Sum(If(haC>(Ref(haC,-1)*(1+cutoff/1000)) AND
       Alert(vtr>=Ref(vtr,-1),2), vc, If(haC<(Ref(haC,-1)*(1-cutoff/1000)) AND
       Alert(vtr>Ref(vtr,-1),2),-vc,0)),period)/(vave+1),period);
highdev:=devH*Stdev(SVAPO,stdevper);
lowdev:=-devL*Stdev(SVAPO,stdevper);
Alert(SVAPO>highdev,2) AND Cross(Ref(SVAPO,-1),SVAPO)
See Figure 1 above for how this results on the chart.
To create an explorer function in MetaStock, copy the up trigger into column A and the down trigger into column B, and in the filter section, just put "colA OR colB." You can then scan all your stocks for a SVAPO turning point.
From my list of 10-baggers, I got (on November 4, 2007) the result shown in Figures 2a and 2b.

TRENDLINE BREAKS
Editor,
I greatly enjoyed Sylvain Vervoort's series of three articles about trendline breaks:
"Trading Trendline Breaks" (July 2007)
"Trading Trendline Breaks, Part 2" (September 2007)
"Trading Trendline Breaks, Part 3" (October 2007)
The most appealing aspect of his approach is the simplicity of it, but what is missing here is the mechanical system that he has used in real time to trade these trendlines, which is not revealed in the article. The trendlines that are used for illustration of individual stocks have been drawn post facto, and the obvious questions I have to ask are: Where are the details for the mechanical system (that he alludes to in the last paragraph of the third article)? How do the real-time results compare to the results published in the S&C articles?
Paul Gertler
Sylvain Vervoort replies:
Somewhere I wrote that I do not know of any mechanical system that can trade trendline breaks the way I would do it manually. And today I see no way of writing code for that. The point I wanted to make is that if you apply trading to trendline breaks, it can be very profitable.
The mechanical system I refer to is SATSFAST. It is comparable to trading trendline breaks on the medium-term trend and is described at https://stocata.org. The results of the backtesting are mentioned here:
https://stocata.org/sats1_en/test.html

ERRATA: CREDIT FOR TRENDLINE BREAKS METASTOCK CODE
Editor's note:
In Sylvain Vervoort's September 2007 article, "Trading Trendline Breaks," credit for the MetaStock system-tester code for simulating trendline breaks that appeared in a sidebar on page 24 should have been given to Spyros Raftapoulos, who originally developed this MetaStock code for his November 2003 STOCKS & COMMODITIES article, "The Zigzag Trend Indicator." We appreciate that this oversight was brought to our attention.

MOVING AVERAGE TRIO
Editor,
I would be happy if you could help me with the code for moving average trios discussed by David Penn in his August 2007 article in S&C, "Moving Average Trios."
I have tried to put the code that was published in the August 2007 issue into VT Trader. However, after I copied the formula into VT Trader, I got a syntax error. For better illustration, I have attached a file [not shown—Editor].
Also, is it possible to apply the moving average trios in the program MetaTrader?
Your help will be appreciated.
Jakub
We are unsure what code you are referring to, since no code was published in David Penn's August 2007 article. In any case, for technical support on individual software programs, or if you need custom code for a particular software program, we recommend you contact the software company that makes the software. Unfortunately, we are unable to code techniques for individual software programs (of which there are many) or provide code-translation services.
For support on VT Trader, please contact CMS Forex at www.cmsfx.com. For support on MetaTrader, please visit www.metatraders.com/.
We try to include code for at least one technique in every issue of STOCKS & COMMODITIES in our Traders' Tips section, and we also encourage our authors to include code with articles when they can to help readers implement the techniques being discussed.—Editor

THE ALLIGATOR INDICATOR
Editor,
In a letter on page 11 of the November 2007 issue of S&C, Edwin Vandamme asked about the alligator. I wanted to point out it is discussed in New Trading Dimensions by Bill Williams (Wiley, 1998).
P.S. Mr. Vandamme might be interested to learn that when my grandfather Theo DeMaertelaere (originally from Ghent) came to this country almost 80 years ago, he became the caretaker of the Florida estate of Moses Annenberg, the subject of the prologue of Fortune's Formula by William Poundstone; my parents and I spent Christmas 1940 visiting Theo at the caretaker's house.
David Barr
Kettering, OH
Readers will find an article in this issue on the alligator indicator. Contributed by Alexander Sabodin, it appears beginning on page 14 of this issue as our Forex Focus article.—Editor

Back to January 2008 Contents
Originally published in the January 2008 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2007, Technical Analysis, Inc.