Tesla’s Stock Price Booms Every Time This Happens (Strategy, Backtest and Trading Rules)
Let’s look at at price pattern that shows that Tesla’s stock price booms every time this happens.
Key Takeaways
- Extreme RSI oversold conditions precede sharp Tesla rebounds
- Tesla rallies strongly despite low overall win rate
- Every signal reached significant unrealized profit shortly after entry
- Short holding periods maximize returns with minimal market exposure
- Strategy compounds efficiently while invested very little time
- Same pattern works weaker but positive on S&P 500
- Mean-reversion signals perform best after deep market pullbacks
It doesn’t happen often, but it has worked well so far:
Tesla’s Stock Price Booms Every Time This Happens
The trading rules are simple:
You find the trading rules at the bottom of the article
If we sell after 1 to 10 trading days after the signal, we get the following table:
Even though the win rate is not 100%, every trade is up significantly at some point after the buy signal: the stock was higher 100% of the time over the subsequent two weeks (this is not shown in the table, though).
Example: Row 6 shows that the average return for the 13 trades is 8.74% and the win rate is 69% (including the one open position at the time of writing.
If you exit after 6 trading days, you get the following equity curve:
You are compounding at 7.5% annually despite being invested only 2.2% of the time.
The chart below shows the buy and sell signals for the strategy (we sell after 6 trading days):
S&P’s Stock Price Also Booms Most Of The Time This Happens
Let’s use the same trading rules for S&P 500. We backtest the ETF with the ticker code SPY, which tracks the index and is the oldest ETF still trading.
There are not many trades from 1993 until today.
Below is the equity curve if we sell the day after the signal is triggered (which is an average of 1.23% and 58% winners):
