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4.2 Float Channel
The Float Chatmet is a series oftwo lines resembling moving averages. Each point on the upper channel line represents the highest high of a float turnover range at that bar in time. Each point on the lower line represents the lowest low ofthe turnover range up imtil and including that bar.
By tracking the highest high and lowest low of the turnover range at any given bar, the Float Channel is just another type of price envelope. Further, the Float Channel is a dj-namic version ofthe Float Box. Ifwe plotted the Float Box at e-erj-bar and connected the right endpoints of all the Float Boxes, the Float Channel would be formed Essentially, the Float Channel adjusts to new high and low values as the float turns o-er.
MERQLAST4)aily OtlXI2an Acme Float Channel(1.0.7J).3 38.170 ZS.800
80.000 -75.000 70.000 «5.000 60.000 -55. 1.
35.006 30.000 25.000
Figure 4.2. Float Cliimiid
.< 1.1"......I< -I il« I .......I.>ii>. V.il...... \ I........-1 h„lL....... I ¹
4.3 Float Percentage
The Float Percentage is a histogram that shows the increase in float turnover starting from a high or low base. The Float Percentage adds up the volume starting from abreakout or breakdown from abase and calculates this value as a percentage ofthe float. As the float percentage approaches 100 o, the trader is alerted to the condition when the float is close to turning o-er. Note that the length ofthe base is adjustable in the Acme code. Reducing the length ofthe base win increase the number of histograms, and increasing the base length wiU reduce the number.
le Float Percent(1.0.7,80.0,0.3)
Figure 4.3. Float Percentage
" - ... ii.Mil.4i.i I..I \:.............I llii 1 iiiiiitblivi V..i..... ......,1,1" li>.li. ,<t.>i I ibj
The upper line is drawn across the highest high ofthe turnover range, and the lower line is drawn across the lowest low ofthe turnover range. The three inner dashed hnes represent Fibonacci retracement lewis of 38 o, 50 o, and 62 The Float Box indicator input parameter FloatFactor can be changed to adjust the float turnover multiple. e.g.. 1.5 or 2.0.
Another way to trade the float model is to use the float channel to buy or shori stocks that touch the float channellines . If a stock is in a strong downtrend and price touches the upper channel, then that is a short signal. If a stockis in an uptrend and price touches the lower channel, then that is along signal. Note the areas in Figure 4.2 where the channel lines are parallel. These lines define the support andresistance bases
In Figure 4.3, the float percentage climbs above 80° towards the end of a deep correction inManugistics (MANU:Nasdaq), signaling a possible trend change. At this point, the Float Percentage indicator will alert the trader when the float is about to tum o-er. The default minimum threshold for a Float Percentage alert is 80*o andcanbe adjustedbythe trader
When a float tumover coincides with a swing low, a short position should be covered. The risk in co-ering later is that once the float becomes absorbed, this can be a prelude to dramatic price spikes. Similarly, a long position should be sold when a float tumover coincides with a swing high.
4.4 Float Trading System (Acme F)
The Acme F System is actually two separate sj-stems, a Breakout sj-stem (FB) and a Fuhback sj-stem (FPI, although both sj-sterns trade with the pre-ailtng trend. The Breakout sj-stem is a channel breakout sj-stem that requires a base of a given length to be estabhshed before a signal is generated. A base is formed if the current -alue ofthe float channel line is close to the previous value ofthe float channel line for a certain number ofbars, thereby forming a nearly parallel segment. Two base counts are maintained, one for the upper float channel line and another for the lower float channel line.
The Breakout sj-stem requires consoUdation near the base. For along signal, the liisli offhe current bar must be within one ATR offhe upper float dianiiel, an indication that the stock is about to break out. For a short signal, the low of the current bar must be within one ATR ofthe lower float channel, an indication that the stock is about to break down.
FinaUy, the Breakout sj-stem uses the table pattem. A table is a consoUdation pattem where the highs or lows of a range ofbars are close to each other. The Acme FB system defines a three-bar table; it calculates the difference between the highest high and the lowest high ofthe table range for long signals and thus the difference between the highest low and lowest low for short signals. This difference must be less than a certain percentage ofthe ATR (TableFactor) to qualify as a vahd signal.
The PuUback system operates between the float channel lines. Ifa stock is in an uptrend, then the sj-stem goes long on a near-tag ofthe lower float channel line. Ifastockisinadowntrend, then the sj-stemgoes short near the upper float channel line. Watch for a float tumover that coincides with the signal.
The performance ofthe Acme F sj-stem depends on the float turnover cj-cle offhe individual stock. If the float turns over on average every thirty days, then the Futcrlengli! parameter should be set to thirty lor consistency (the default value for FilterLength \s thirty days). The float value \s obtained automatically
from thecmeGe/Moa/lookup function (refer to Chapter 1 . as shownmthe fohowing calculations.
1. Get the float ofthe stock using the function AcmeGeiFloat.
2. Compute the Average True Range for the past 30 days (ATR30).
3. Calculate the 50-day mowng average (MA50).
4. Compute the upper Float Channel (FCuppcr) based on the float.
5. Compute the lower Float Channel (FCldwt,) based on the float.
4.4.1 Breakout System (Acme FB) LongSignal
1. Calculate the base count of the upper float channel (BCupp,,).
2. Calculate the TableDelta = TableFactor * ATR30 (default TableFactor = 0.35).
3. Determine the Highest High ofthe last 3 bars (HH3).
4. Determine the Lowest High of the last 3 bars (LH3).
I Entry Rules I
3. HH,-LH,<= TableDelta
4. Close >MAso
5. Buy the next bar at or above flic High + (EntryFactor * ATRju)
I Exit Rules: Profit Target
1. Sell half of the position at or above the High + (ProfitFactor * ATRju)
2. Sell half of the position at or above the High of ProfitBars ago + (2*Pn.fitFact.)r*ATRt,,)
I Kxil Rules: .Sii.p b>sh
1 SrII .ill slu.rs ...... b.l<.v
I-..I 1 ..IV Si..pt..i.
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