While not the above strategy, a related one which seems to work well is intra-industry reversals (see http://www.ccfr.org.cn/cicf2010/papers/20091213190553.pdf).One of the niftiest things they found is "We show that the stocks with extreme returns that are not relative industry losers and winners do not exhibit short-term reversals.In fact, we find that these stocks exhibit significant return momentum."i.e., if a stock has a big price move, you can predict whether it will correct from that.If its industry peers did the same thing, the move will likely continue.If not, it will likely mean revert.Unfortunately I think this family of effects is perhaps one of the thingsmost likely to be affected by the rise of industry and sector ETFs.In the olden days (a few years ago!) if Coke slipped while its peerswere doing well there would be individual stock analysts thinking"hey, Coke looks like a good deal, let's buy some".These days not many of the people who trade with shortish time horizons(which drives short term price movements) look at individual stocks at all.You can see the same capitulation here on the board.Jim
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