The thesis
channel-pullback is a mean-reversion strategy with a trend filter. It buys pullbacks to the lower regression channel or volume support only in confirmed uptrends, then exits at the upper channel or resistance. It is currently live, trading a 24-name large-cap universe spanning tech, financials, healthcare, staples, and energy — AAPL, MSFT, NVDA, JPM, V, UNH, XOM, CAT and others.
The logic is sound in principle: dip-buying inside an established uptrend is a well-worn edge. The question, as always, is whether the edge survives out of sample.
Recent activity
Over the past two weeks the strategy has been steadily active, executing one to three trades per scheduled run with zero rejections. Recent fills include buys of AAPL (6 sh @ $315.28) and JPM (5 sh @ $352.96), a sell of UNH (4 sh @ $385.57), and a full round-trip in BAC — bought 31 shares at $64.07 on 8/13 and sold at $64.52 on 8/14 for a thin gain. A CAT position bought at $863.68 was later trimmed at $837.16, a small loss.
One thing worth flagging: total account value has drifted lower across the window, from $9,746 on 8/14 to $9,504 on 8/20. The book is running well below its notional starting equity, so recent live performance has been soft even as the machinery works cleanly.
Backtest and validation
The headline backtest covers 451 days: +7.62% total return (4.19% CAGR), Sharpe 0.40, max drawdown 14.83%, across 137 trades. Win rate is a low 39.39% — this is a strategy that wins less than it loses per trade but keeps winners larger than losers. Turnover is very high at 2,311%, meaning fees and slippage matter a great deal to the real-world result.
The walk-forward story is where caution enters. Validation did not pass. Three of four folds were positive, but the dispersion is alarming:
- Fold 1: +6.53% (Sharpe 1.25)
- Fold 2: −11.42% (Sharpe −1.70, 16% drawdown)
- Fold 3: +20.68% (Sharpe 3.86)
- Fold 4: +3.63% (Sharpe 0.74)
Out-of-sample return averaged 3.63% with OOS Sharpe 0.74 — respectable, but the Deflated Sharpe Ratio of just 0.196 (against 7 trials) signals the result may not survive multiple-testing scrutiny. PSR of 0.702 is more encouraging but not decisive.
Verdict
channel-pullback has a coherent thesis and executes reliably. Its strengths are a defensible edge and tolerable drawdowns in three of four regimes. Its risks are real: a single fold erased over 11%, the DSR flags likely overfitting, turnover is punishing, and live equity is currently underwater. This is a strategy worth watching in paper — not yet one to trust with conviction.