Portfolio Design

Advanced concepts in stock investment portfolio design.  Fundamentals, technical analysis and many other related topics are discussed.

Screen for Large One-Day Price Drops

 

There is nothing more frustrating than suffering a substantial one day price drop for one of your stock holdings. Quite often, these lemons could have been detected in advance as they often have experienced such drops in the recent past. Today, I'll show you how to screen for such occurrences.

Stock market analysis tools provided by Portfolio123.


In this tutorial, the Portfolio123 screener will be used to screen for close-to-close price drops of 10% or more over a look-back period of 100 days. Once the screener rule(s) have been written and tested, then they can be employed in simulations and portfolios to weed stocks exhibiting such behavior.

Start by creating a new screen from the main Portfolio123 menu by selecting New Stock Screen from the SCREEN pull-down.

Selection of new stock screen

Go to the SETTINGS tab and select S&P 500 Index as the stock universe.

Selection of S&P 500 index as the stock universe

Migrate to the RULES tab and select Sum of value in set. Then click on ADD to copy this rule into the screen rules.

Portfolio123 LoopSum function

The function LoopSum executes the "formula" parameter the number of times specified by iterations. A special CTR variable must be used inside "formula".  By default, CTR increments by one starting from zero up to iterations-1 if the start and increment parameters are not specified. Note that the maximum number of iterations is 50.

Enter the following rule into the rule box: LoopSum("Close(CTR)/Close(CTR+1)<=0.9",50). Then click on TOTALS. Portfolio123 will display the number of stocks that meet the screen criteria i.e. 10% drop in one day within the last 50 days.

Screen rule for detecting one day price drop of 10% or more within the last 50 trading days

16 stocks meet the criteria of a 10% price drop within the last 50 trading days. Now lets extend the look-back period from 50 days to 100 days.

Screen rule for detecting one day price drop of 10% or more within the last 100 trading days

In the screenshot above, the LoopSum function is called twice, once with no time offset, and once with a 50 day offset. The combined sum represents a total count of 10% close-to-close drops over a look-back period of 100 days. Click on total to determine the number of S&P 500 stocks that fulfill the criteria.

45 stocks fulfill the criteria. Now lets determine the total count of price drops for each stock. In order to do this, the ShowVar function must be used to store the LoopSum count. Then the count can be seen using the Screen Factors Report.

Re-write the screen rules as shown below. Then click on RUN SCREEN.

Using ShowVar in the screen rules for later use with Screen Factor reports

Once the screen has been executed, click on Screen Factors to see the count for each stock. Click on @Count to sort the table from highest to lowest.

Screen Factor report sorted by stocks with the highest count of one-day drops greater than 10%

As can be seen from the above screenshot, four stocks had two close-to-close price drops of 10% or more within the last 100 days.

When creating screen rules like the one in this example, it is always a good idea to verify the results just to make sure that the rule works as expected. For the first stock Diamond Offshore Drilling Inc. (Symbol: DO), click on the small panel button as shown below.

Screenshot illustrating how to call up PANELS for the stock Diamond Offshore Drilling Inc.

The above action brings up PANELS for Diamond Offshore Drilling Inc.  Click on PRICES to get a list of recent daily prices.

From the PANELS window, click on PRICES to list the historical prices for Diamond Offshore Inc.

By examination of the historical daily prices for Diamond Offshore Inc., it is found that two price drops of 10% or did indeed occur, once on 09/01/16 and the second on 09/09/16.

Historical daily prices for Diamond Offshore Inc.

It can be concluded that the rule works correctly based on the examination of the historical data for Diamond Offshore Inc.