The AIQ code for finding head & shoulders (H&S) patterns based on Giorgos Siligardos’ article in the May issue of Stocks & Commodities, “Head & Shoulders, Algorithmically (Part 2),” is provided at the following website: www.TradersEdgeSystems.com/traderstips.htm.

I did not directly translate the code given in Siligardos’ article into AIQ EDS code because the AIQ program has chart pattern recognition built in. The code I am providing will find H&S patterns — as well as many other patterns — for either completed or emerging patterns.

In Figure 5, I show an example of a completed H&S topping pattern with the sell signal (red down arrow). The bars after the signal indicate that this trade was immediately profitable. In Figure 2, I show an example of a completed inverse H&S bottoming pattern with a buy signal (red up arrow). The bars after the signal indicate that this trade was immediately profitable.

The code and EDS file can be downloaded from www.TradersEdgeSystems.com/traderstips.htm, and is shown below.

!DETECTING HEAD & SHOULDERS ALGORITHMICALLY
!Author: Giorgos E. Siligardos TASC May 2013
!Coded by: Richard Denning 3/17/2013
!USER DEFINED FUNCTIONS:
C is [close].
Name is description().
!COMPLETED HEAD & SHOULDERS PATTERN-TOPPING:
HS is [Head and Shoulders].
HS_breakoutup if HS > 0.
HS_breakoutdn if HS < 0.
!COMPLETED HEAD & SHOULDERS PATTERN-INVERTED:
iHS is [Inv Head and Shoulders].
iHS_breakoutup if iHS > 0.
iHS_breakoutdn if iHS < 0.
!EMERGING HEAD & SHOULDERS PATTERN-TOPPING:
e_HS is [eHead and Shoulders].
e_HSemerge if e_HS > 0 or e_HS < 0.
!EMERGING HEAD & SHOULDERS PATTERN-INVERTED:
e_iHS is [eInv Head and Shoulders].
e_iHSemerge if e_iHS > 0 or e_iHS < 0.
!REPORTS TO LIST ALL HEAD & SHOULDERS PATTERS:
ShowAll if C>0 and (HS <> 0 or iHS <> 0 
or e_HS <> 0 or e_iHS <>0).

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MACD divergence is a tried and tested technical tool. If you look at the daily price chart of Verizon below, you can clearly see the recent high on 4-12-2013. Note the MACD is well below the indicator peak back in the middle of March.

The AIQ code based on Ron McEwan’s article in the March issue of Stocks & Commodities, “Low-Frequency Trading,” is provided at the following website: www.TradersEdgeSystems.com/traderstips.htm.

The cumulative indicators on the advances and declines for the NYSE are provided in the first section of code that follows. However, I have never liked cumulative indicators because results can vary depending on where the accumulation is started. I do not recommend using the first code set below that replicates the author’s indicator because it runs so slowly that you will think your computer is frozen. Thus, I coded an alternative that uses the built-in advance-decline (A/D) line and then takes a moving average of the built-in A/D line. This version runs quickly and probably gives similar results.

I did not test the first coded version. I tested my second code set as a timing system on the S&P 500 ETF (SPY) from 1981 to 2/12/2013 (Figure 7). As with most timing systems, the risk was reduced based on a lower sigma than that of the markets and the return was also less than just buying and holding the SPY for the test period.

The code and EDS file can be downloaded from
www.TradersEdgeSystems.com/traderstips.htm.
The code is also shown below.

!LOW-FREQUENCY TRADING
!Author: Ron McEwan, TASC April 2013
!Coded by: Richard Denning
!www.TradersEdgeSystems.com
!INPUT:
advMAlen is 252.
!ABBREVIATIONS:
C is [close].
OSD is offSetToDate(month(),day(),year()).
!AUTHORS INDICATOR AND SYSTEM (processes very slowly-see alternate below):
DaysToStart is min(advMAlen,scanany(month()=02 and day()=05
and year()=1980,252*50) then OSD).
NYadv is TickerUDF(“DJIA”,[Adv Issues]).
NYdec is TickerUDF(“DJIA”,[Dec Issues]).
ADVpctTot is (NYadv-NYdec) / (NYadv+NYdec) * 1000.
ADVcumPct is sum(ADVpctTot,^DaysToStart).
ADVcumPctMA is simpleavg(ADVcumPct,252).
HD if hasdatafor(advMAlen +10) > advMAlen.
Buy if ADVcumPct > ADVcumPctMA and HD.
Sell if ADVcumPct < ADVcumPctMA.
!ALTERNATE TO ABOVE (due to processing speed recommend that this one is used):
ADline is tickerUDF(“DJIA”,[AD Line]).
ADlineMA is simpleavg(ADline,252).
BuyAlt if ADline > ADlineMA and HD.
SellAlt if ADline < ADlineMA.