Both of those trade ideas were based on a reversion strategy. The retail sector had fallen too far. Semiconductor stocks had rallied too much. The rubber bands for those sectors were too stretched – retail to the downside and semiconductors to the upside. A snap-back move was inevitable.<\/p>\n
Those trades went against me at first. But, as you can see in the charts below, the adverse moves were small and temporary…<\/p>\n
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In both cases, the rubber bands snapped back and produced profitable trades.<\/p>\n
There’s no doubt that 2017 was a great year for momentum traders. The broad stock market was in an unrelenting uptrend. Any pullbacks that happened were relatively minor. And there wasn’t much volatility at all.<\/p>\n
In that environment, momentum trading should outperform a reversion strategy. But my Delta Report<\/em> subscribers still did pretty well anyway.<\/p>\n We made a total of about 76 trades. We profited on 61 of them – for a win rate of just over 80%. The average holding period was about one month. And the annualized return was well above 100%.<\/p>\n And we did all this in a low-volatility environment – which is usually a tough time for a reversion strategy.<\/p>\n Looking out into 2018, I expect we’ll do even better.<\/p>\n I don’t know for sure where the market is headed. I have my suspicions, of course. All I know for sure is that periods of low volatility in the stock market are always followed by periods of high volatility, and vice versa.<\/p>\n 2017 was a low-volatility year. The Volatility Index (VIX) dipped below 10 multiple times. That’s an absurdly low level.<\/p>\n We’re likely to see an increase in volatility in 2018. The proverbial rubber bands are going to stretch farther in both directions. That means momentum traders are probably going to have a tougher time in 2018. And reversion traders are going to have many more opportunities to profit.<\/p>\n In tomorrow’s Market Minute<\/em>, we’ll look at one of my favorite “rubber band” trading techniques.<\/p>\n Best regards and good trading,<\/p>\n Jeff Clark<\/p>\n P.S. <\/strong>Like I said, the market environment next year should be perfect for Delta Report<\/em> subscribers.<\/p>\n And with my reversion trading strategy… along with earnings season right around the corner… well, let’s just say it’s an exciting time for my readers.<\/p>\n![](\"https:\/\/casey-assets.s3.amazonaws.com\/images\/misc\/jeff-clark-signature.png\")
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