Thesis
channel-pullback is a trend-following mean-reversion hybrid: it buys pullbacks toward the lower regression channel or volume support only within confirmed uptrends, then exits at the upper channel or overhead resistance. It runs live on a 24-name large-cap universe spanning tech (AAPL, MSFT, NVDA), financials (JPM, V, MA), staples (PG, KO, WMT, COST), and healthcare (JNJ, UNH). The design intent is sound — buy dips, but only where the primary trend still supports a bounce.
Recent Activity
The strategy remains active without drama. Over the last six scheduled runs (2026-07-24 through 07-31) it logged zero rejected orders and total equity hovered near flat, moving between roughly $9,990 and $10,084. Recent fills show the mean-reversion pattern in practice: a PG round-trip (bought at $145.99, sold at $150.90), a KO position (bought 24 shares at $81.44, later sold at $88.05), and a UNH trade sold at $433.57 against an earlier $420.31 entry. Not every leg wins — PG was also re-bought at $144.98 after prior sells — but the round-trips are broadly consistent with the buy-low/sell-into-strength thesis.
Backtest & Validation
Over 451 days the backtest returned 7.62% (final equity $10,761.52, ~4.19% CAGR) with a Sharpe of just 0.40 and a max drawdown of 14.83%. The win rate is a modest 39.39% across 137 trades — this is a strategy that relies on winners outrunning a majority of small losers, not on being right often. Turnover of 2,311% is high, though total fees were a negligible $137.
The walk-forward picture is where caution is warranted. Three of four folds were positive, but the spread is enormous: fold 3 delivered +20.68% at a Sharpe of 3.86, while fold 2 lost -11.42% at a Sharpe of -1.70. That single bad window drives the max drawdown and reveals real regime sensitivity — this approach can bleed when uptrends fail to reassert.
Crucially, validation did not pass. Out-of-sample return was a thinner 3.63% (OOS Sharpe 0.74), and after adjusting for 7 trials the deflated Sharpe ratio (DSR) collapses to 0.196 — well short of a convincing edge — even though the probabilistic Sharpe ratio (PSR) sits at a more encouraging 0.702.
Verdict
The strengths are genuine: a coherent, well-motivated thesis, disciplined execution, and three of four positive folds. But the risks are equally clear — a sub-40% win rate, heavy dependence on one strong window, sharp regime drawdowns, and a deflated Sharpe that says the backtest edge may be closer to noise than signal. channel-pullback is worth keeping live in paper as an observation candidate, but on current evidence it has not earned a validation pass or capital conviction. We want to see fold-2-style regimes handled better before upgrading our stance.