Exploiting the Mean Reversion Anomaly in Large Cap Stocks
The Weekly Reversion Strategy ranks and selects up to 5 US large cap stocks that are showing short term technical weakness but have relative strength over the longer term . This is commonly known as ‘buying the dip’ or ‘mean reversion trading’.
→ Tradelist from June 2024 inception
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● Weekly Reversion Strategy offered as a subscription service
● 5 stock picks delivered to your inbox every Weekend
● Simple – enter at Monday’s open & exit at Friday’s close
Short term mean reversion after selloffs is a known anomaly and studies have shown that exploiting it has been profitable over the long term. Backtesting shows that buying the weakest stocks in large cap sectors and holding for a brief time will generate returns in excess of the benchmark.
A weakness of this type of strategy is that it may continually buy into a stock that is in fundamental decline (examples: Enron, Lehman Brothers). To sidestep this situation, the strategy uses a trend filter to ignore stocks that are in a significant price downtrend.
Every weekend, the strategy computes indicators across stocks in the S&P100 index to select up to 5 candidates which it buys on Monday’s open and exits on Friday’s close. Because the model is buying falling stocks, it does not hold any positions over the weekend. The strategy does not use stop losses or profit targets.
Each position is given an allocation of up to 20%. Sometimes there may be fewer than 5 stocks due to lack of candidates meeting the entry criteria. Also, the exposure may be less than 20% for a stock due to 2 reasons: (i) stock’s extreme volatility and (ii) regime filter detects a bearish trend in the overall index.
Here is the backtested performance of the strategy (blue line) compared to the buy & hold S&P500 benchmark index (gray). This backtest includes delisted stocks making the analysis free of survivorship bias, and index constituents are dynamically updated through time to match actual index composition history.
Equity Curve Versus Benchmark

Monthly Performance Table
this table is updated at the start of every month

Performance and Risk Statistics

Implementing the Strategy
The weekly model allocations are emailed to subscribers every weekend so that they may place trades in their account to match the model at Monday’s open and subsequently exit all positions at Friday’s close. Each week’s portfolio will contain up to 5 stocks with a maximum allocation of 20% to each.
The process has been designed with ease of implementation in mind and subscribers should expect to spend about 10 minutes each week to enter/exit their positions.
FAQ:
How to Subscribe?
We use the infrastructure of a service provider called ‘Kit.com’ to do a weekly email blast to subscribers. Once subscribed, you will start receiving the weekly newsletter into your inbox every weekend with the updated stock picks plus a review of prior picks and a performance summary.
How to Cancel?
Canceling your subscription is easy. Click on the ‘Update your profile’ link that appears at the bottom of every subscriber email we send out. Then on the ‘Update your profile’ page click on the link ‘View billing in Stripe’. Then on the Stripe billing page simply click ‘Cancel plan’.
Does Returnstream Trade this Themselves?
Yes! I trade this in my personal account (started June 2024) and show screenshots of my brokerage account balance in my weekly update videos.
I Work During the Day. Can I Still Trade This?
Yes! You can place resting orders.
For the Monday morning entries, the buy orders can be entered anytime prior to market opening, for example on Sunday night. The orders can be entered as ‘Market’ (for regular trading hours) or ‘Market on Open’.
The Friday sell orders can be entered as ‘Market on Close’ or MOC anytime before Friday 3:45pm EST which will sell your holdings at 4pm EST.
I signed up after the weekly signal was sent. Do I have to wait until next Weekend to get signals?
No! Just send me an email and I will send you the current signals.
Is AutoTrading Available?
Yes, there are 2 ways subscribers can have the Weekly Reversion Strategy autotraded in their accounts:
- autoshares.com is a broker that provides this service
- System Research LLC, a Registered Investment Advisor, provides this service at Charles Schwab.