1) Dropped at least 2% today.
2) Did not make a 10-day closing low. (Suggesting no breakdown.)
3) 14-period ADX is less than 20. (Suggesting congestion.)
Buying when these conditions occurred and selling “X” days later produced the following results looking back to 1960:
Negative expectations and very low % profitable. Quite negative on a small sample size even as far out as 4 weeks. For those that would like to take a closer look, here are the dates: 6/23/70,12/02/74, 1/7/81, 4/14/88, 5/14/99, 2/9/00, 1/5/01, 10/29/01, 9/12/02, 11/1/07, 12/11/07, 4/11/08.
To gain a larger sample size, I decided to look at the NDX, which historically has been more volatile. In this case I required a 2.5% drop (instead of 2%) and kept the other requirements the same - no closing 10-day low and a 14-period ADX below 20. With less historical data this test only ran back to 1986. Below are those results: