The rules we tested
- Uptrend: close above the 200 day average, the 50 day above the 200 day and higher than 10 sessions ago.
- Touch: in the last 5 sessions, a daily low within 1% of the 50 day average, or below it.
- Bounce: today closes back above the 50 day, up on the day, and at least 2% above the low of those 5 sessions.
- Entry: buy at that close. Exit: sell 10 trading days later.
- Stocks: US stocks above $10 trading at least $20 million a day on average, including companies that later stopped trading.
- Judged against: the average eligible stock over the same days, after a 0.1% round trip cost, and against random stocks bought on the same day.
*2025 runs to May.
Pullback and curl
A second version waits for a 5% pullback from the 20 day high to the 20 or 50 day average, then buys the first close above the previous day’s high. Across 49,966 trades it did 0.09% worse than the average stock over 10 days.
Earnings dips too
We also tested buying stocks that beat earnings, sold off and then held or touched their 50 day average. They bounced no more than ordinary dips in the same stocks.
The most recent 18 months
In the most recent 18 months, which we held back and checked separately, the same rules gave 10,747 trades and −0.22% against the average stock, with 51% of trades making money. That is not enough to tell apart from luck.
What it means for your trading
- A bounce off the 50 day is a reasonable place to time an entry in a stock you already want to own.
- It is not a reason to buy on its own.
- The Stock Scanner shows bounces as context only, for that reason.
Limits: daily closes from mid 2018, which includes one bear market (2022). Results are averages over thousands of trades; any single trade can do far better or worse.