Stocks at all time highs.

Research
1

Does anyone manage to create a Simulation that explodes stocks at all-time highs successfully?

I have a few Simulations and Live Strategies based on Momentum that work quite well, but when I add “all-time highs” to the equation, all of them ends badly, or the performance falls dramatically.

My approach is quite similar to Momentum stocks.

I used all the “all time highs” variables I know, even some ADX to set a breakout of a previous range.

Any recommendation or advice or idea?

Thanks in advance.

2

It really depends:

https://seekingalpha.com/article/4369602-long-term-reversal-in-equity-returns

So a 52 Week high (less ATH) on a stock that did not do so well in the last 3-5 Years is positive (I call it early momentum).
An ATH on a stock that did exeptional well the last 3-5 Years in general it underperforms.

If you use momentum, try industry momentum as a combination in the ranking system.
Also try to combine your momentum with high sortino ratios in the ranking system.

And if you are in small caps combine with low volumne, but exclude ADRs.
https://www.jstor.org/stable/222483

3

Check out Mohanram’s G_Score; it’s a fundamental score that uses various signals to find potential outperformers in the “high valuation” bucket (highest 20% by P/B). It’s essentially the inverse of Piotroski’s F_Score, which looks for winners in the “low valuation” spectrum.

I wrote about and tested the G_score:
https://seekingalpha.com/article/4400681-how-to-differentiate-highly-valued-from-overvalued-stocks-to-beat-market-part-1

It was originally intended to be long-short, but I tested only as a long, and historical performance has been decent (depending on time period as well).

Cheers,
Ryan

4

There used to be a Hungarian investor called Nicolas Darvas who exploited stocks’ ATHs to make good profits:
https://www.investopedia.com/articles/trading/07/darvas-box.asp

I applied various versions of his strategies but found they are not very successful in the p123 backtesting period from 1999 to today. So it appears to me that this strategy was likely only advantageous in the 1950s investment regime when Darvas was active.

In general I find that exploring ATHs is only of value if the rest of the market is not at all time high. You can use a time series like the following to see how many stocks are at a 1 year high and modify it to your universe:
https://www.portfolio123.com/app/series/summary/13787?st=1&mt=8

Good luck!

5

Thank you all guys, very much for your help and advice. You are great.

I will try to follow your recommendations, to see if my ATHs systems improve.