Combining Stock Amplitude, Five-Year ROE, and Reversal Signals

Summary

This stock selection proposal combines a daily price-amplitude threshold, return on equity above 15% for five consecutive years, and a reversal or engulfing-style price factor. It presents the combination as a way to pair active price movement with a record of profitability and a price-pattern filter. Suggested refinements include adding moving averages or volatility measures, profit growth and leverage metrics, and considering market conditions when selecting entry dates.

The document gives indicative formula and Python examples, but they do not fully implement the stated rules: the examples substitute a moving-average condition for the reversal factor and contain placeholder logic for additional volatility measures. No backtest, performance results, or precise definition of the reversal signal is supplied. The author also notes that a reversal filter can miss stronger market advances and that ROE can be distorted, so the screening idea requires validation and careful implementation.

Key ideas

• The proposed screen combines price amplitude above one with ROE above 15% for five consecutive years and a reversal factor.
• Additional technical and fundamental measures are suggested to broaden the assessment.
• The examples do not precisely encode the stated reversal signal and include placeholders.
• No empirical performance evidence is provided, and the document identifies limitations in ROE and reversal filters.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.