Thesis
channel-pullback is a classic mean-reversion play 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. The intent is sound — you are trying to buy dips inside momentum rather than catching falling knives — and it trades a liquid, defensive-leaning universe of 24 large caps spanning tech, financials, healthcare, and staples (AAPL, MSFT, NVDA, JPM, UNH, PG, XOM, and peers).
Recent activity
The strategy is live and trading daily. Over the last week its scheduled runs executed cleanly — one to three fills per run, zero rejections. Total account value has drifted down modestly, from roughly $9,646 on 18 Aug to $9,512 after the 25 Aug run. Recent tape shows the signature round-trip behaviour: it bought AAPL at $315.28 on 20 Aug, then re-entered at $308.56 on 25 Aug after selling at $311.60 the day prior — repeated small pullback buys in a single name. It also cycled BAC (in at $64.24, out at $64.52) and took a UNH position at $390.72. This is high-churn by design.
Backtest and validation
Over 451 days the backtest returned 7.62% (final equity $10,761), a 4.19% CAGR, with a 0.4 Sharpe and a 14.83% max drawdown. The headline caveats are the 39.39% win rate across 137 trades and an eye-watering 2,311% turnover — this engine wins less than four times in ten and leans entirely on asymmetric payoffs and fee tolerance to stay green ($137 in fees over the run).
Walk-forward validation did not pass. The nuance matters:
- Three of four folds were positive. Fold 3 was excellent (+20.68%, 3.86 Sharpe, 3.26% drawdown) and fold 1 solid (+6.53%). Out-of-sample the most recent fold returned +3.63% at a 0.74 Sharpe.
- Fold 2 is the wound: −11.42% with a −1.7 Sharpe and 16.09% drawdown. When trend confirmation broke down in early-to-mid 2025, the pullback-buying premise inverted.
- The probabilistic Sharpe ratio (0.702) is respectable, but the deflated Sharpe ratio is only 0.196 across seven trials — meaning after accounting for selection effort, we cannot confidently say the edge is real rather than luck.
Verdict
Strengths: a coherent thesis, disciplined daily execution, a diversified liquid universe, and three of four folds in the black with one genuinely strong regime.
Risks: the low deflated Sharpe is the honest tell — the edge is not yet statistically distinguishable from noise. The sub-40% win rate and extreme turnover make it fragile to slippage and regime shifts, and fold 2 shows exactly how the strategy behaves when its uptrend filter fails. It runs live, but it has not earned an auto-deploy pass. We would want to see the deflated Sharpe climb and fold-2-style drawdowns contained before treating this as a validated edge rather than a promising, still-speculative one.