Screening Equities with RSI, Three Down Days, and Recent Gains

Summary

This stock screen combines a 14-period RSI below 65 with three consecutive sessions where the close is below the open. It also requires at least one daily gain of 8% or more during the prior 25 trading days. The article first describes a 10% gain threshold, then uses 8% in its final rule and code; that discrepancy should be resolved before implementation.

The rationale is to find stocks that have recently shown weakness but also experienced a sharp gain, which the article interprets as possible rebound potential. It suggests adding valuation measures such as price-to-earnings or price-to-book ratios to assess fundamentals, or relaxing the gain threshold to broaden the screen. No backtest, return data, or validation is presented, and the claimed fundamental significance of a past price jump is not established. The screen is a selection rule, not a complete trading strategy, and the article notes that its technical emphasis may limit its relevance for long-term investing.

Key ideas

• The final rule requires RSI below 65 and three consecutive sessions in which each close is below its open.
• At least one daily gain of 8% or more must have occurred in the preceding 25 trading days.
• The article conflicts between a 10% threshold in its initial description and 8% in its final rule.
• It proposes adding valuation metrics, but provides no backtest or performance evidence.

Tags

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