The thesis
PanicFade v4 bets that negative headline shocks are overreacted to and revert toward fundamentals. Mechanically, it buys names hit by sentiment below -0.4 while they are already oversold — RSI14 under 35 and trading below their 20-day SMA — and sizes into the panic rather than waiting for confirmation. Exits are symmetric to the entry logic: it takes profit on reversion (RSI14 back above 50, or price reclaiming the SMA20) and hard-stops on fresh lows under continued negativity, treating that as a genuine fundamental break rather than noise.
The design is grounded in the sentiment-overreaction literature, principally arXiv:2509.11970 (2025) on asymmetric sentiment feedback, corroborated by stock-level investor-sentiment work in JRFM. The universe is deliberately conservative — 24 mega-cap and large-cap names across tech, financials, healthcare, staples, and energy — which keeps the contrarian bet on liquid, well-covered stocks rather than the small caps where panic-fading most often goes to die.
Recent activity
Here the picture is quiet. The last six scheduled runs (Aug 11 through Aug 18) each report 0 executed, 0 rejected, with the book flat at $10,000 cash and $10,000 total. In other words, no name in the universe has recently satisfied the full sentiment-plus-oversold entry gate. That is arguably the strategy working as designed — a selective fade should be idle most of the time — but it also means there is no live P&L to point to yet. The edge is currently a claim about the backtest, not something the live account has demonstrated.
Backtest and validation
Over 1,233 days the strategy returned 37.93% (final equity ~$13,793), a 6.79% CAGR, with a Sharpe of 0.96, a 9.3% max drawdown, and a 62.88% win rate across 530 trades. The validation layer is the more encouraging story: a 4-fold walk-forward with all four folds positive, out-of-sample return of 21.7% at an OOS Sharpe of 2.44, a Probabilistic Sharpe Ratio of 0.985, and a Deflated Sharpe of 0.56 against 27 trials. Fold-by-fold performance actually improves over time — 1.6%, 3.88%, 10.14%, then 21.7% — which is the opposite of the decay you'd expect from an overfit rule.
Strengths and risks
The strengths are real: robust out-of-sample behaviour, a shallow drawdown profile, and a PSR that suggests the Sharpe is unlikely to be pure luck. The risks deserve equal weight. The full-sample Sharpe under 1.0 and a 6.79% CAGR are modest for a strategy carrying single-name concentration risk. Turnover is enormous at ~5,807%, so slippage and fees are a live threat to the edge. The DSR of 0.56 across 27 trials is respectable but not commanding. And the current week of inactivity is a reminder that this is a feast-or-famine signal — it may sit in cash for long stretches, then be judged entirely on how a handful of panic entries resolve.