Why don't you do this: find a stock - any stock. Plot as many moving averages as you can (e.g. 5 SMA, 10 SMA, 30 SMA, etc.), and then see if they compress. If they do, then it means something is about to happen. You may then buy a straddle. Or, if you're really keen on predicting where it will go and think you can determine the direction, make a directional bet. If not, then buy a straddle.
For WMT I see compression in 2003 on with not THAT much price movement... Interesting. Has this been backtested?
ReplyDeleteIt probably has at some point - I do not have results.
ReplyDelete