Bottom Pickers

Only monkeys pick bottoms they tell me…undeterred, I back tested 25 popular market timing indicators on my Bloomberg terminal. Pretty much everything gets blown out on the short side, so I focused mostly on finding long indicators.

One of the top performers is a simple 20 day Rate of Change strategy. The parameters I set were to create a long position when Bitcoin dropped <= -20% over a 20 day period and then to exit the position when it gained >= 60% or more in a 20 day period.

Eyballing the chart below, you can see that the 20D ROC tends to oscillate within a pretty consistent ~60% on the top end and -20% on the bottom end.

The current 20D ROC value is -23.88% with only 6 occurrences since 2016 of equivalent corrections. Price performance following previous occurrences shows that gains are normally front end loaded – meaning that if there is a rebound, it will likely be aggressive with the bulk of short term gains coming in the first 5 days.