1 year SPX Correlation Deep Pullback

High Probability Trading with the Delphian Daily Trades

A pullback is a small to moderate drop in a stock price from recent peaks that occurs during an uptrend. Delphian finds stocks in pullbacks that have met one of our aggressive pullback targets (State 4, Target 2) and have a high correlation to the S&P 500 over a one year period.  Backtesting revealed this signal occurs near the end of the pullback and to expect the stock to resume the trend higher soon after.


Trade Theory:

Most often when a stock transitions from State 1 to State 2, the stock is in a temporary pullback. Sometimes the stock will continue the downtrend into State 4. Once the State Modeling State 4, target 2 has been hit, the stock has hit one of Delphian’s most aggressive target price for the pullback.  The target 2 price is a strong support area and bullish stocks will usually have a reversal at that support level and continue its original trend higher.  Using a secondary confirmation can assist in solidifying a potential price support and the continuation of an uptrend. Correlation with the S&P 500 offers trend analysis that suggests when the S&P 500 is on an uptrend, stocks highly correlated with the index should continue an uptrend as well.  The combination of these two signals presents a potential near-term bottom with a typically rapid reversal.


The 1 Year Correlation to SPX Pullback uses the following signals:

  • Correlation greater than or equal to 85% to the SPX over 1 year (252 trading days) 
  • State Modeling™ set for State 4, target 2 met today



Charts depicting confirmation of a pullback:

DPZ State Modeling – Current State is State 1 on 2/8/2018

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DPZ closing price crossed below Bollinger Bands 2.5 SD for 20 days on 2/8/2018

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DPZ closing price is above the 50 days SMA on 2/8/2018

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DPZ chart after the bullish signal on 2/8/2018

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Trade results after buy signal:

Long stock with 5% profit and 10% stop loss

Entry 02/08/2018, 6.7% profit achieved on 02/12/2018 (In trade 3 trading days)

Long call with 25% profit and 100% stop loss

Entry 02/08/2018, 36.53% profit achieved on 02/09/2018 (In trade 2 trading days)

For additional option strategy results, please fill form on the right side of the page. One of Trading Strategists will reach out to you.



Explanation of the signals:

  1. State Modeling™is a proprietary signal from Delphian Trading. Stocks are in a State numbered from 1 to 8 at any given time and only in one state at a time.  States 1, 3, 5 and 7 are bullish and States 2, 4, 6 and 8 are bearish.  State 1 is extremely bullish while State 8 is extremely bearish.  This signal allows users to find symbols based on their current state, current state profit and loss targets and whether or not their current targets or stops losses have been met.
  2. Correlationis measured from -1 to 1, with -1 being inversely correlated and 1 being perfectly correlated. Inversely correlated symbols move in the opposite direction of each other and correlated symbols move in the same direction. Therefore, if a symbol is highly correlated to the S&P 500 and the S&P 500 is moving higher than the correlated symbol should move higher as well.  S&P 500, SPX, 1-year correlation is a measure to determine how correlated symbols are to the S&P 500 over a one year period.

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