The thesis
PanicFade v4 bets that markets overreact to bad news. When a liquid large cap gets hit by a negative headline (sentiment below -0.4) and is already technically oversold (RSI14 under 35, trading below its 20-day average), the strategy buys into the fear and sizes into the decline. It exits when the name reverts — RSI14 back above 50 or price reclaiming the SMA20 — and hard-stops on fresh lows under continued negativity, reading that as a genuine fundamental break rather than a sentiment blip. The design is grounded in recent overreaction/reversion literature (arXiv:2509.11970, 2025), and it restricts itself to a 24-name blue-chip universe (AAPL, JPM, UNH, XOM and peers), with live-quote cash accounting and sanity-banded stops.
Recent activity
The last two weeks have been quiet, which is consistent with a strategy that only acts when panic is present. Most scheduled runs (Oct 14, 16, 19, 20) executed nothing. The exceptions were reversion exits: on Oct 13 it sold NKE (29 @ $35.53) and HD (4 @ $293.95), and on Oct 15 it closed MCD (5 @ $242.65). The MCD round-trip is the thesis working as intended — bought Oct 1 at $231.79, sold two weeks later at $242.65, a clean reversion gain. HD and NKE, entered Sep 21, were closed roughly flat-to-down, a reminder that not every fade reverts.
The live paper book sits near $9,804 total with $8,642 in cash as of Oct 20 — lightly invested and roughly level, not yet showing the backtest's slope.
Backtest and validation
Over 1,233 days the backtest returned 37.93% (final equity $13,793), a Sharpe of 0.96, max drawdown of 9.3%, and a 62.88% win rate across 530 trades. Encouragingly, the walk-forward validation passed with all four folds positive (+1.6%, +3.88%, +10.14%, +21.7%) and an out-of-sample Sharpe of 2.44 in the most recent window.
Strengths and risks
The strengths are real: a coherent, literature-backed thesis; consistent out-of-sample positivity; and shallow drawdowns for a strategy that buys falling knives.
The risks deserve equal billing. The CAGR is a modest 6.79% — most of the headline return is time, not edge. Turnover is extreme at 5,807%, so execution and fees ($530 across 530 trades) matter. Most importantly, across 27 trials the Probabilistic Sharpe is 0.985 but the Deflated Sharpe is only 0.56 — once you account for how many variants were tried, confidence is moderate, not decisive. The standout Fold 4 also coincides with a favorable recent regime. Verdict: promising and honestly validated, but one to size cautiously until the live book earns its keep.