Trend Reversal Signals from Cycle Analysis and MACD Divergence

Summary

This report outlines a short-term reversal strategy for China’s CSI 800 stocks. It combines a moving-average system intended to classify trend state through cycle analysis with multi-timeframe MACD divergence. A bullish divergence occurs when price makes a lower low without a corresponding MACD low, which the report interprets as weakening downside momentum. Entry also requires the individual stock’s downtrend to appear finished and a market timing filter that identifies lower systemic risk in the Shanghai Composite.

The report compares fixed holding periods and moving-average exits, each with a 10% stop. It reports that adding the market filter improved the selected setup’s win rate and reward-to-risk ratio; a 15-day exit with the stop produced the highest stated returns among the described exit alternatives, while an MA10 exit was described as more stable. These results are historical backtests, including a stated evaluation from 2018 onward, and do not establish future performance. The summary provides limited detail on costs, execution, sample construction, or robustness.

Key ideas

• The strategy combines cycle-based trend classification with MACD divergence to identify potential reversals.
• Entries require a stock downtrend to appear exhausted and a market filter to indicate lower systemic risk.
• The report compares fixed-duration exits with a moving-average exit, both paired with a stop loss.
• Reported performance comes from historical CSI 800 backtests and may not generalize to other periods or execution conditions.

Tags

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