Public trading strategy
Market just had its biggest drop in months — buy the dip on the S&P 500
Thesis
The market just experienced its sharpest drop in months due to a strong jobs report making investors nervous about interest rates. However, Goldman Sachs points out that corporate profits are at record highs and there is a clear path for the market to recover. When the market drops this fast on broad macroeconomic fears rather than fundamental business failures, it historically tends to bounce back quickly.
Strategy approach
Build a mean-reversion strategy on SPY and QQQ using the daily timeframe. Enter a long position when the price closes below the lower Bollinger Band (20, 2) and the RSI(14) drops below 30. Exit the position when the price touches the upper Bollinger Band or after a maximum hold period of 10 trading days. Use a 3% stop loss.