An interesting snapshot in time ...

[grems8544]

When you have the time, could you explain how you calculated the > or < 3 R/R?

The first step is to calculate all of the pivot levels from the daily out to the yearly. Additionally, I calculate the simple moving averages for the 50d and 200d. Per Billy's and Maxime's methods the following weights are assigned:

Yearly: 8
200d: 7
Semester: 6
Quarterly: 5
50d: 4
Monthly: 3
Weekly: 2
Daily: 1

To calculate R/R, Maxime's method searches from the present price upward to the first pivot that has a weight of 3 or higher. The distance between the present price and this pivot level is determined and is viewable in my spreadsheet in the "Dist2Res" column.

In a similar manner, the distance between the present price and the lower support level is returned. This is found in the "Dist2Sup" column.

The R/R ratio is simply the result of Dist2Res/Dist2Sup.

This is Maxime's method and as a baseline, it works well.

A few comments:

1) Dis2Sup can be a very low number as the price drops to the support level. In fact, R/R can sky rocket to >>3 as the difference between the present price and the first support level collapses to 0. This is a non-linear behavior that bothers me because the R/R value becomes disproportionately large as the difference value in the denominator tends towards 0.
2) Dis2Res can become 0 as our prices approach the resistance level from below. Same problem with non-linearity as above but now we tend to 0 in the R/R, which is not completely accurate.

I am working on an algorithm right now that uses the cluster weights instead of the the absolute pivot levels. This seems to give a smoother transition of R/R as we move around within clusters, and it will better for computerized trading. The impact of this weighting is revealed in the column "Bal", which represents the cluster weighting "balance" on the resistance size compared to that on the support side. A natural hypothesis is that stocks with very little overhead cluster weighting should appreciate more than stocks with heavy overhead cluster weighting. Here are the stocks with the most favorable cluster weighting going into the open on Friday morning:



Correspondingly, here are the stocks with the least favorable cluster weighting:



Work in progress...

Regards,

Paul