Strategy: Buy the Dip with Montley Fool Recommendations

BE Trader

Newbie
5 0
There is a popular stock recommendations service Montley Fool. You may have seen their articles in the news - they are all over the place. One of the lists they offer is called "Rule Breakers". Described as:
Discover market-beating growth stocks, learn which businesses are poised to be tomorrow's stock market leaders, and see which companies are the best stocks to invest in today.
I have been following those a while and always had an idea to turn that into a day trading strategy. So here we go I tested the following thesis: these stocks are popular growth stocks with a strong market interest behind them which should result in a lot of participants buying the dip.

Stocks Selection
  • All "Rule Breakers" buy recommendations made in H1 2021 (from 2021-01-14 to 2021-06-24)
    • 12 tickers total: NET, DDOG, SNOW, TTD, CPNG, PLNT, GDRX, TDOC, SNBR, AXON, MRNA, W
    • I'm trading from 2021-07-01 to 2021-11-30 (to avoid look ahead bias)
  • Enter Criteria (condition to open a position)
    • Only enter in the first half of the day
    • Wait for 9:40 (market is open for 10min)
    • Stock price dropped more than 1% from the open price of the day
    • There is a sign of recovery (EMA 8 is going up on a 3min chart)
    • If there are multiple candidates - buy the one with highest relative volume within 10min
  • Exit Criteria (condition to close a position)
    • 1% profit or a trailing stop loss 0.25%
    • alway exit EOD
  • Initial capital $10,000
    • Gain is reinvested the next day
    • Loss reducing the buying power the next day
Results: Cumulative GAIN 35.34% | Max Draw Down -4.07% | Alpha 24.89 (vs. SPY buy&hold).
Not that bad for 5 month?
"Rule Breakers" buy&hold performance for the same period: 6.39% (buying each stock worth of $833. 10K / 12 ~ 833)
RB vs buy and hold.png

Returns vs. buy and hold benchmark - $SPY^
RB Tickers.png

Tickers traded ^

Disclaimer: all calculations made using BreakingEquity
 
 
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