Annotated Models
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An analysis of the strategy model for 3Com Corp. clearly demonstrates how it is possible to recognize instruments that are rather unsuitable for technically assisted trading. As in the case of the model for NYSE:BSX, here we also find extended problematic phases in the training period. Aside from the fact that in the years 1994-1997 the system is unable to outperform the development of the stock, throughout the entire training period, we repeatedly find phases, at times lasting several months, which NeuroStrategy finds difficult to master.
In contrast to the production chart for BSX, however, this chart reveals what we might in fact be facing with NYSE:BSX tomorrow. Although NeuroStrategy predicts the dramatic slump of the security in 2000, it largely squanders the profits thus gained during the subsequent phase, before a consolidation sets in at the beginning of 2001. As in the case of NYSE:BSX, we would not use this model productively, since the characteristics of equity development during training already indicate that this stock in comparison to others offers fewer clues for predictions and assessments of risk. We make this choice, even though the obtained return of 350% seems enticing.
A look at the period of production reveals that with NeuroStrategy investors would not only have survived the year 2000 unscathed, but would have completed it very successfully. From the standpoint of risk assessment, we always ask ourselves (and advise you to do the same) whether it would not be better to refrain on principle from using strategy models with dubious characteristics. Models such as those for BSX and COMS can still be useful for analysis. They can provide indications of drastic changes such as the slump of 3Com, for example. For a portfolio that is to be managed by NeuroStrategy, however, we would look for 10 to 20 instruments, where the strategy models are convincing throughout - such as in the case of AOL Time Warner or IBM.
This is why we are leaving the signal chart without commentary. Nevertheless, it is certainly worth the effort to study it in detail. During this "falling knife" phase, you can see that the system made some clever calculations in order to stay on the side of profitability.
