GLD 5/19/2023: 7-Bar Pattern Occurred Only One Other Time in its History. Possibly Bearish for Monday’s Open. [Article] (Point-and-Click NinjaTrader® Strategy)

Trading Strategy Article

SUMMARY: By backtesting the 7-bar chart pattern on GLD’s daily chart that ended on May 19, 2023, we were able to determine that it has only happened one other time in GLD’s price history with that instance being on November 9, 2015. Going short on the open of the daily bar after the November 9, 2015 bar and exiting 7 bars later would have been a profitable trade.

This 7-day chart pattern can be seen at the right edge of the chart of GLD’s daily bars ending on May 19, 2023:

The aforementioned 7-bar chart pattern has the following characteristics:

1. The six daily bars prior to the May 19, 2023 bar all closed below their open prices.
2. The open and close prices of the six daily bars prior to the May 19, 2023 bar were all below the 7-period simple moving average of the close price.
3. The open of the daily bar six bars prior to the May 19, 2023 bar was higher than the close of the daily bar directly prior to the May 19, 2023 bar.
4. The daily bar on May 19, 2023 opened above the open and close of the previous bar and closed above its own open.
5. The open and close prices of the daily bar on May 19, 2023 were also below the 7-period simple moving average of the close price.

To determine if this chart pattern had ever occurred on GLD’s daily bars in the past, and if so, what would happen if a short position was taken on the open of the next trading day and exited on the open of the bar seven bars later, we created a Quagensia N Edition strategy using point-and-click, generated its NinjaTrader® NinjaScript® strategy code, and backtested the strategy in NinjaTrader® Desktop’s Strategy Analyzer.

We were hoping that this chart pattern would have occurred many times in GLD’s daily bar price history so that the results of the backtest would have been more statistically significant, but unfortunately our backtest showed that it only happened one other time in GLD’s price history, on November 9, 2015. Going short on the open of the daily bar after the November 9, 2015 bar and exiting on the open of the bar seven bars later would have been a profitable trade, as can be seen in the chart below:

While this is clearly not a statistically significant finding and we were hoping that there would have been more times in history when this pattern occurred on GLD’s daily bars, we decided to publish this Quagensia N Edition strategy and our findings anyway so that:

1. Traders could see the other time in history when this specific chart pattern occurred on GLD’s daily bars in case it informed their trading decisions for Monday’s open.
2. Traders would have another example of how to test their trading ideas before they trade them instead of assuming that a testable chart pattern is bullish or bearish.
3. This specific Quagensia N Edition strategy will be useful to traders in the future on other instruments and not just on daily price charts. Traders can change the strategy’s input parameters from the NinjaTrader® Desktop’s Strategy Analyzer’s user interface to change various aspects of the strategy such as:
   • The moving average length, or “Period”, of the simple moving average (SMA).
   • The minimum number of consecutive bars before the final bar in the chart pattern that must close below their open prices and must have open and close prices below the moving average of the close price.
   • The extent to which the close price of the final bar in the pattern must close above its open on a percentage basis.
   • Whether to go long or short on the open of the bar after the chart pattern occurs.
   • The number of bars to stay in the trade, starting on the open of the bar after the chart pattern occurs.

Traders can then run backtests to determine if the similar pattern based on their customizations is bullish or bearish looking out a customizable number of bars.

We invite you to download the Quagensia N Edition strategy on this page, open it in Quagensia N Edition, generate its NinjaTrader® NinjaScript® strategy code and test it in NinjaTrader® 8 or NinjaTrader® Desktop where you should be able to verify our results. You can explore the effect of tightening or loosening the thresholds for the entry criteria by changing the values of the strategy’s input parameters in NinjaTrader®. Finally, if you have a valid paid license for Quagensia N Edition you can change the Quagensia N Edition strategy’s logic without code so you don’t need to use our assumptions and our choice of using the simple moving average instead of one of the many other moving averages built into Quagensia N Edition as shown in the screenshot below:

This article is an example of algorithmic journalism. We invite content creators to use a Quagensia Desktop Application to create their own articles based on tested trading ideas. And we invite traders to use a Quagensia Desktop Application to test their ideas before they trade them.

This trading idea is subject to the disclaimers in our Terms of Service.