tax loss selling and January effect - 2nd posting

[Wong <whs@xxxxxxxxxxxx>]

Hi all members:

I posted a message on 98-11-01 about tax loss selling and January effect -
whether anyone has done any research and how successful it would be.

So far there is no response.

I'm sure a lot of us in the list trade either equities or equity options,
and would be very interested in taking advantage of the so-called "tax loss
selling " (buy when everyone is dumping losing stocks) and January effect
(hopefully the depressed stocks will go up in price from Dec to Jan/Feb
next year) - provided that such phenomenon is pretty consistent and may
lead to profits.

I've just got hold of Dec98 issue of Money magazine.  On pages 41-42,
Michael Sivy, who wrote "Rules of Investing", had this to say:

"Now there are plenty of attractive <tech> stocks to buy again..."

"In addition, tax selling has been intense this year - and once that
selling ends, many depressed stocks will rebound.  The so-called January
effect began in October and will likely continue into the new year."

The likely companies that stand out, according to Sivy, amongst others, are
DELL, CPQ (esp CPQ), INTC, AMAT and MSFT.

I'm not good in writing systems to test this idea, but I did some work.  I
would REALLY BE VERY INTERESTED if someone else (hopefully more than 1) has
done similar analysis, and would like to share the results, not just
privately, but for all members to benefit from, through omega list.

For my purpose, in very general terms, my system is roughly like this:

Entries (multiple entries):

-	start looking for buy signals in Nov and December each year
-	close crosses above moving average (I use Jurik's JMA)
-	buy h+.0625 stop
-	allow for up to 5 consecutive entries

Exit:

-	up to a maximum number of days since entry
-	use built-in money-management stop loss
-	use built-in risk-trailing stop loss
-	use built-in breakeven stop loss
-	use built-in profit target 

Each stock will be tested from Jan 91 to present.

Each buy entry will involve 1 share.  All calculations are based on 1 share.

Each stock will be optimized (or way over curve-fitted).

I've tested the system on several stocks, and here are some of the results.
 (Since my system is extremely mediocre and I run optimization, the results
may or may not be reliable in future.  And please, don't critize my system
or methodology.  I know they are bad already.  What I would like is
hopefully to generate more interest and participation from other members in
this topic ("tax loss selling...")


				CPQ		BBY		CSCO
				-------	-------	--------
total net profit		19.49		79.2		35.57
gross profit			27.17		85.41		36.95	
total # of trades		20		16		19
# of winning trades		14		9		18
largest winning trade	7.62		20		6.03
largest losing trade	-2.91		-3.19		-1.38
average winning trade	1.94		9.49		2.05
average losing trade	-1.28		-0.89		-1.38
ratio avg win/avg loss	1.52		10.7		1.49
max conseq winners		7		5		18	
max conseq lodrtd		3		5		1
max drawdown			-8.75		-6.06		-14.78
profit factor			3.54		13.76		26.87

Hope (furvently) to hear from at least some of you out there !!!


Wong