I looked at days when the high of the day was above the prior day’s high. Looking at IWM data, about 52% of the days had higher highs then the previous day. The third row is a sequence that starts with a lower high, then has a higher high. The second column is number of days with a higher high, and third column is number of days with lower high, the fourth column is column 2 / (column 2 + column 3). The last row is a sequence of lower high, followed by 2 higher highs. You still have about 58% of the times having a higher high.
higher | not higher | higher % | |
total | 1276 | 1158 | 52% |
higher | 317 | 225 | 58% |
2 higher | 185 | 132 | 58% |
I also looked at the prior day’s close in relation to the 5 day simple moving average (SMA) to see the chances of having a higher high, and found:
new high | not higher | ||
close above 5 sma | 846 | 467 | 64% |
close above 5 sma | 430 | 691 | 38% |
Which seems to indicate if the close is above the 5 day SMA, then 2/3 of the time it will have a higher high the next day, which is better than the 52% anytime percentage.
Similarly looking at the open in relation to the prior day’s 5 day SMA, if the prior day had a higher high:
new high | not higher | ||
open above 5 sma | 661 | 331 | 67% |
open below 5 day sma | 73 | 211 | 26% |
open above 5 sma, below prior high (included in row2) | 405 |
The last row is the number of times IWM opened above 5 day SMA, but below the prior day’s high. In other words, 256 times the open was above the prior day’s high (out of a total of 1276 days where the previous day had a higher high).
The conclusion I draw from this is that if the open (or prior close) is above the 5 day SMA, then the high of the day prior day is a good upside target. On the other hand, if it opens below the 5 day SMA, you should not target the high.
Remember, this is a study of higher highs, and gives not give any indication about the day’s close.
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