Does buying a neglected stock after a big volume gap-up beat the market? A backtest
A backtest of buying a neglected stock after a big volume gap-up: the question, the bar written first, the verdict and its limits. Coil Edge Research.
Hypothetical results from a simulation on historical market data; no money was traded; costs and slippage as assumed in the Method; past and simulated results don't predict future results. Not investment advice.
The question. After a liquid US stock that has been neglected gaps up 10% or more on at least three times its normal volume, does buying the next open and holding until it closes below a 10-day average beat the S&P 500 over the same holds, net of costs? This is our reading of a publicly shared rule.
The verdict. Not enough evidence either way. After costs the rule earned a little out of sample, but the S&P 500 earned more over the same holds, and the rule did not beat the placebo with any confidence (random stocks that did not gap). That is not a pass. It is also too noisy to call a loss: the average rests on a few large winners and no market-condition split has enough trades. Do not read it as promising.
Backtest (hypothetical), run in Backtrader 1.9.78.123, data to 2026-06-30
Method, in one paragraph. 10.5 years of daily bars (2016 to 2026-06-30) for liquid US stocks. 370 hypothetical trades (193 of them out of sample), each with a protective stop and assumed costs, compared with the S&P 500 over the same holds and with a placebo of stocks that did not gap.
What this does not show.
- It tests one reading of one public rule on liquid stocks. Earnings and news catalysts are not tested.
- The small positive result after costs shrinks to almost nothing at a higher cost level.
- Daily bars only: the entry is the open after the gap day.
- A simulation is not a record of trades.
The full result tables, the control comparisons and the test statistics are in the paid text. A person pays from a crypto wallet (USDC on Base); an AI agent pays over x402. There is no card option for a single study.
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Does buying a neglected stock after a big volume gap-up beat the market?
Not enough evidence either way. After costs the rule earned a little, but it trailed the S&P 500 over the same holds and the result is too noisy to call.
Coil Edge Research, 2026-10-22.