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Follow up from prior posts:
[https://www.reddit.com/r/algotrading/comments/1tzicir/buying\_the\_dip\_why\_catching\_a\_falling\_knife\_near/](https://www.reddit.com/r/algotrading/comments/1tzicir/buying_the_dip_why_catching_a_falling_knife_near/)
# Update: Buying the Dip (June 2026) - How is our trade doing against history?
A week ago, on June 5th, the NASDAQ (QQQ) suffered a massive -4.8% drop. Based on my previous statistical backtesting, my original rule triggered: **Buy sudden -3.3% to -6.3% drops as long as the QQQ is trading within 5% of its 52-Week High.**
So, we are exactly 5 trading days into the current trade. How are we doing compared to history?
# The Historical Stats (Near 52-Week High Regime)
Over the last 25 years, there have been exactly 21 historical instances that met these exact criteria. Here is the timeframe analysis of what happens *after* you buy a sharp dip near the top of the market:
|Timeframe|Average Return|Win Rate|
|:-|:-|:-|
|**1 Month**|\+0.50%|70.0%|
|**2 Months**|\+0.96%|60.0%|
|**3 Months**|\+4.68%|80.0%|
* **Average Max Drawdown (Heat): -8.41%**
https://preview.redd.it/5gc856b2v37h1.png?width=1000&format=png&auto=webp&s=bb3a7060031c2cdb635322e559abb8e051729d0a
*(See attached image: return\_distributions\_near\_high.png for the boxplot distributions of the returns over time)*
https://preview.redd.it/kmqfnuq0v37h1.png?width=1000&format=png&auto=webp&s=bee7a504f3740cef7b7e9e1a7b09966bd0048775
*(See attached image: max\_dd\_distribution\_near\_high.png for a histogram of the maximum drawdowns)*
The edge is incredibly resilient with an 80% win rate by the end of Month 3. However, notice how volatile the first 1 to 2 months are. The average trade will flush down an additional -8.4% before recovering to post those solid 3-month gains.
# The Current Path vs. Historical Average
https://preview.redd.it/4mr5os75v37h1.png?width=1400&format=png&auto=webp&s=35069647c4b28dccdf22b5b31d854f66a2cc29ff
*(See attached image: current\_vs\_historic\_near\_high.png)*
If you look at the trajectory chart, the **red dotted line** is the average path of all 21 historical trades that triggered this specific rule. The **thick blue line** is exactly where we are today since the June 5th close.
**The play-by-play so far:**
1. **The Initial Flush:** Historically, the first 1-2 weeks of this trade are incredibly volatile. The market rarely just goes straight up; it usually features a "secondary flush".
2. **Current Reality:** We saw exactly that! By day 3 (June 10th), the market flushed down an additional -1.6% from our entry. It was scary, but well within the historical norm.
3. **The Rebound:** Yesterday and today saw massive rallies. As of the close today (June 12th), our trade is currently sitting at **+2.3%** in just 5 trading days.
The Metrics
* **Average Primary Flush:** `-3.97%`
* **Average Secondary Flush:** `-8.09%`
* **Average Days to Bottom:** `17.2 days`
TIP
**Takeaway 1:** The "Secondary Flush" is, on average, exactly double the size of the Primary Flush.
**Takeaway 2:** When you buy the dip, expect roughly **3.5 weeks (17 trading days)** of choppy, downward volatility before you hit rock bottom and the true 3-month recovery begins.
# TL;DR
The current trade is tracking the historical average almost perfectly, but actually outperforming it in the short term. The initial shock caused a brief, secondary flush (which history warned us about), followed by an aggressive V-shaped bid.
We still have 2.5 months to go, but "buying the dip near All-Time Highs" is currently proving its statistical edge in real time!
***\*\*\*Edit - Will be another post digging into this separately\*\*\****
# The Metrics
* **Average Primary Flush:** `-3.97%`
* **Average Secondary Flush:** `-8.09%`
* **Average Days to Bottom:** `17.2 days`
TIP
**Takeaway 1:** The "Secondary Flush" is, on average, exactly double the size of the Primary Flush.
**Takeaway 2:** When you buy the dip, expect roughly **3.5 weeks (17 trading days)** of choppy, downward volatility before you hit rock bottom and the true 3-month recovery begins.