Morales & Kacher Signals Template within the EdgeClub software

Morales & Kacher Signals Template within the EdgeClub software

Background

This trading template within the EdgeClub software shows Pocket Pivots, Buyable Gap-Ups and Seven week rule indicators that are described in the following books by Gil Morales and Dr. Chris Kacher:

  • ‘Trade Like an O’Neil Disciple: How we made 18,000% in the Stock Market’
  • ‘In The Trading Cockpit with the O’Neil Disciples: Strategies that Made Us 18,000% in the Stock Market’

Trade Like an O'Neil DiscipleIn the Trading Cockpit with the O'Neil Disciples



The books show you how to make use of these signals and incorporate them into your trading. There’s more to it than just buying or selling whenever a signal flashes. The EdgeClub software allows you to view daily candidates and quickly scroll through a series of charts to arrive at your trading decisions. The ‘Trading Cockpit’ book shows all the rules and contains numerous examples and explanations of how to trade using these signals.

For a discussion on Pocket Pivots and buyable gap ups, check out the free presentation handouts that are available on Gil and Dr. K’s website¬†http://www.virtueofselfishinvesting.com.

Template Details

The template is divided into 4 main groups of columns:

Column Group 1

Column Group 1 shows basic stock technical data.

Template Column Group1

Template Column Group1

The information is displayed after you press ‘Run’ for the chosen symbol list.

  • Symbol: The stock symbol
  • Date: The date of the last data in the symbol list (could show current day if using intraday data)
  • Close: The¬† Close price of the stock for the date shown
  • Volatility: The Historical Volatility

Column Groups 2 & 3

Groups 2 and 3 contain the Pocket Pivot and Buyable Gap Up information. The below image shows the information sorted by the ‘Today’ column in the Buyable gap up group. To sort by any other column, just click in the column header.

Column Groups 2 & 3

Column Groups 2 & 3

Pocket Pivot Group:

  • Today: Contains a ‘Yes’ if there is a Pocket Pivot signal today for the stock
  • Days Since: Shows how many daily bars have occurred since the last Pocket Pivot

Buyable Gap Up Group:

  • Today: Contains a ‘Yes’ if there is a Buyable Gap Up signal today for the stock
  • Days Since: Shows how many daily bars have occurred since the last Buyable Gap Up
  • Vol%: The % Volume today compared to the 50 day Moving average of volume

Column Group 4

Group 4 columns are all about the seven-week rule as described in the Morales and Kacher books and presentation materials.

Column Group 4

Column Group 4

  • Days Clear: Number of daily bars (including today) that the stock has been above the moving average and has not violated the moving average. A 0 value indicates that the stock is currently in violation of the moving average.
  • Days in Violation: Number of daily bars (including today) that the stock has been in violation of the moving average. A 0 value means that the stock is not currently in violation of the moving average.

These values help to determine sell points in previously purchased securities. Once purchased a stock should be monitored to see if it violates the 10 day moving average within 7 weeks (approx 35 trading days). If it does then a violation of the 50 day moving average should be used as a sell point.

Note that Morales and Kacher allow for some porosity about the 10 and 50 day moving averages and so a violation of the moving average is not simply a close below that average. To experience a violation of the moving average the stock must have closed below the average and then subsequently crossed below the low of that day. To see how this looks on a chart, take a look at the following:

Moving Average Violation Example - No Violation

Moving Average Violation Example – No Violation

In the above chart, even though the 10 day moving average was crossed there was no ‘violation’ of the moving average because the low of the cross day was not subsequently taken out. Note how this allows you to stay in a position where others might be shaken out.

Moving Average Violation

Moving Average Violation

In the above chart, the moving average was not officially violated until the stock closes below of the intraday low (horizontal line) of the cross day.

New Chart Layouts

The following four new chart layout have been added into the layout group ‘Morales & Kacher’:

Morales & Kacher Chart Layouts

Morales & Kacher Chart Layouts

Each layout is self descriptive, along with the main candle chart view there are sub areas which show either Pocket Pivot signals, Buyable Gap Up signals, Moving Average Violation signals or all 3. The following example shows a chart with the Morales & Kacher – All layout:

Morales & Kacher Chart Layout - All

Morales & Kacher Chart Layout – All

The ‘All’ layout contains the following sub areas:

  • MK_PP: Pocket Pivot signals
  • MK_BGU: Buyable gap-up signals
  • MK_MAVIOL: 10 and 50 period Moving Average Violation signals

Supporting Scripts

Behind the scenes, a few new scripts have been added to support the implementation of this new template. These scripts can be used outside of the template for other purposes such as in the Entries and Exits tab to get a historical list of all signals from all stocks, or to generate a trade simulation backtest report.

Script NameDescription
VFACT(N)Indicates how the current bar's volume compares to the N period moving average of volume. The output is expressed as a factor, for example a value of 2 indicates that current bar's volume is twice as high as the N-Period moving average of volume.
MK_PPPocket Pivot Scan
MK_BGUBuyable Gap Up Scan
MK_BARSSINCE_PPThe number of bars since a Morales and Kacher Pocket Pivot.
0: Not seen yet;
1: Seen Today;
N: Seen N-1 bars ago.
MK_BARSSINCE_BGUThe number of bars since a Morales and Kacher Buyable Gap Up
0: Not seen yet;
1: Seen Today;
N: Seen N-1 bars ago.
MK_MAVIOL(N)Scans for a Morales & Kacher Moving Average Violation. N denotes the MA period. A moving average violation is defined as a close below the N period moving average followed by a cross below the low of that day
MK_BARSINVIOLThe number of bars the security has been in a Morales and Kacher moving average violation.
0: Not currently in violation of moving average
1: Violation occurred today
N (N>1) : Violation occurred N-1 bars ago
MK_BARSOUTVIOLThe number of bars that have occured since the security recovered from a Moving Average violation.
0: Currently in a violation
1: Came out of violation today
N (N>1): Came out of violation N-1 bars ago

Summary

This EdgeClub trading Template allows you to follow Morales and Kacher’s ideas and make trading decisions by showing you what signals are occurring daily. By double clicking on any one of the rows you can also see a chart of the security and by having this chart on one half of the screen and the list on the other half you can very quickly scan daily setups to develop your own feel for these signals and indicators. The Morales and Kacher website and books provide you with all the extra details you need in order to make this style of trading work for you.