Screening Stocks for a Sharp Daily Decline After a Recent Large Gain

Summary

This document presents a short-term stock screen using three conditions: daily amplitude above 1%, a current-day decline between 4% and 5%, and at least one daily gain of 10% or more during the preceding 25 trading sessions. The intended use is to identify stocks for subsequent investment consideration. It supplies indicator and Python examples, but does not define entry timing, exits, position sizing, or a portfolio construction process.

The rationale is to combine current volatility and a bounded pullback with evidence of a recent sharp upward move. The article provides no backtest, performance results, or comparison against a benchmark. It cautions that the screen ignores fundamentals and longer-term prospects, and that relying on past price spikes may select shares out of step with current market conditions. It recommends treating the prior gain as one input and considering additional fundamental and trading measures. The code examples are described as references and may not precisely implement the prose criteria, so their conditions would require review before use.

Key ideas

• The screen looks for amplitude above 1%, a daily loss between 4% and 5%, and a 10% or greater gain within the last 25 sessions.
• The method combines a current pullback with evidence of a recent sharp upward move.
• The article supplies no backtest or measured evidence that the selection rule is profitable.
• It warns that the screen omits fundamentals and may overemphasize historical price moves.
• The supplied examples should be checked against the written criteria before implementation.

Tags

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