Continuing analysis with the “Touch Moving Average” tool I built, today I report on Steelcase Industries performance. I have a trade strategy for SCS that beats Buy & Hold, albeit only by about 15%. Here’s the details:
- Company Name: Steelcase Industries
- Symbol: SCS
- Market Cap: $1.94B
- 1M Average Daily Volume: ~1M shares
- Time Period Analyzed: 1 Jan 2009 – 11 July 2014
- Number of trading days: 1402
- Number of trades from this signal: 26
- Number of winning trades: 12
- Number of losing trades: 14
- Average Win per share: $2.07
- Average Loss per share: -$0.72
- Max Win per Share traded: $3.74
- Max Loss per share traded: -$1.54
- Max Drawdown: 27%
Trading Strategy for Steelcase Industries
This is another iteration of my “Touch the SMA” strategy. Briefly, the strategy works like this: Wait for a touch of the SMA, then wait for a close higher than the day it touched the SMA. When that happens, BUY at the Open the next day.
In this case, the optimum strategy for SCS is to use a 34 Day Simple Moving Average as the trigger. I set a Profit Target of 127% of the opening price and a Stop-Loss Trigger of 90% of the opening price.
This is a long-only “channel” trade, which means that the expectation is that the stock trades inside a channel without significant breakouts. This is a fairly wide channel I set here for SCS, which is why we have higher-than-normal Max Drawdown numbers.
- The maximum number of consecutive losing trades is 4.
- The maximum number of consecutive winning trades is also 4.
- Average losses are about a third of the average wins, which is why this trade makes money even though only 46% of the trades are winners.
- The expectancy of this trade is 2.45 when executed exactly according to my rules.
Results of Simulations
I ran a simulation using this strategy starting with a $10,000 account. I traded the maximum number of shares allowed for my account size, traded the signal every time it occurred since 1 January 2009, subtracted $13/00 for every account and assumed a 28% capital gains tax rate. After all that, the net account value was just under $30,000.
By comparison, using a Buy & Hold strategy for SCS, starting at the same time frame with the same starting capital resulted in a net account value of about $26,000. (I assumed a 7.5% long-term capital gains tax rate.) So, this is a marginally profitable strategy. I’m not crazy about this because I am much more conservative about my drawdowns, but I present it here for your edification because – in spite of my reservations – it still beats Buy & Hold.
Standard disclaimer: just because this trade worked in the past is absolutely no guarantee it will work in the future.
If you’d like more information about this trade or about using the analysis tool in your own trading, contact me.