SPY Overbought Reversal
Mean-reversion strategy that shorts SPY when RSI exceeds 70 and price touches the upper Bollinger Band. Targets a pullback to the 20-day moving average. Works best in range-bound or mildly trending markets.
π‘ Current Signal
SPY RSI at 58 β not yet in overbought territory. Monitoring.
π Indicators
π§ͺ Backtest Results
| Period | Jan 2015 β Dec 2024 |
| Win Rate | 62% |
| Profit Factor | 1.54Γπ Premium |
| Max Drawdown | -9.8%π Premium |
| Total Trades | 68π Premium |
π Methodology
## SPY Overbought Reversal β Full Methodology
Β
### Entry Criteria
1. **RSI(14)** closes above 70
2. **Price** touches or exceeds the upper Bollinger Band (20-period, 2Ο)
3. **Confirmation:** Wait for a red candle (close < open) after both conditions are met
Β
### Exit Rules
- **Profit target:** Price returns to 20-day SMA
- **Stop loss:** 1.5% above entry
- **Time stop:** Close after 10 trading days
Β
### Position Sizing
- Risk 1% of portfolio per trade
- Can use put options instead of shorting for defined risk
Β
### Filters
- Skip during Q4 (OctβDec) which has strong seasonal bullish bias
- Skip if 50-day MA > 200-day MA AND price is > 5% above 200-day MA (strong uptrend)
Β
### Backtest Notes
Tested on SPY daily bars from Jan 2015 to Dec 2024. This is a counter-trend strategy β win rate is moderate but reward:risk is favorable when it triggers. The seasonal filter significantly improved performance.
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π·οΈ Tags
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