Category Archives for "Mean Reversion"

October 21, 2015

Biotech: My love-hate relationship

My love

RDUSa

My hate

CELGa

The two charts above are from recent trades I have taken. Charts created in AmiBroker.

On July 20, 2015 IBB, iShares Nasdaq Biotechnology ETF, made a closing high of 398.  About three months later it closed at 289 for 27% loss. A very common thing I hear from traders is that they “don’t trade biotechnology or pharmaceutical stocks.” I completely understand. These stocks tend to be very volatile and news driven. But does removing these stocks really reduce your drawdowns? What happens to your Compounded Growth Rate? Time to see what the research shows us.

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The Health of Stock Mean Reversion: Dead, Dying or Doing Just Fine

My second post on this blog was a look at mean reversion, Is mean reversion dead? Given I am using a new data provider(Premium Data), it has been almost two years since that post and there have been other articles on this recently, I figured it was time to check again. The research will focus on Russell 1000 stocks since 1995. The test is back to 1995 covers 3 bull markets and 2 bear markets.

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Developing Leveraged ETF Strategies

How should one develop a strategy for leveraged ETFs? Do you develop the strategy on the unleveraged ETF and then apply the rules to the leveraged ETF? Or do you develop the strategy on the leveraged ETF directly? Or do you develop the strategy on the unleveraged ETF then use signals on that to trade the leveraged ETF? On first blush one would think that all three methods would produce identical results. But as we know, the obvious is rarely the right thing for strategy development.

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