Apr. 20 Myth: If a stock moves far above its 50-day moving average, it must pull back soon?

History shows the opposite. Strong upward momentum often leads to more upside, not a quick drop.

VQF studied 180 cases from 1999 to 2025 where QQQ was about 8% above its 50-day moving average (similar to now).

Results:

🔹 After 2 weeks: 63% chance of going up, median gain 1.24%

🔹 After 4 weeks: 65% chance of going up, median gain 1.66%

The most interesting finding: how far QQQ is above the average has almost no link to returns in the next month (Pearson correlation = 0.002). Knowing how “overbought” it is does not help you predict profit or loss.

Conclusion:

Mean reversion tries to catch the less than 40% cases, where price drops quickly. But in most cases, a strongly extended stock shows strong internal strength, not an immediate fall. The trend is your friend!

#StockMarket #Investing #DataAnalysis #TradingStrategy #QQQ #Finance #Momentum