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When technical indicators predict short-term reversal
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I went through the history of some of the most successful trading rules from the 80s in the US market. Then, combining them, I created a strategy based on picking the best stocks for the next month. It has underperformed the benchmark heavily, generating the worst portfolio of the entire pool of stocks. Therefore, I analyze short-term reversal as explanation. The same could also justify why the worst predicted performer portfolio is the one that does best. This shows that, when too many investors go into the same direction of trades, the outcome is the existence of opportunities to exploit.
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Behavioral finance Technical trading Short-term reversal Alpha creation.