Narrative Reversal Screen

Narrative Reversal Screen — Buy The Beaten Down

🔍 Pre-flight checklist — reversals fail spectacularly in the wrong regime

A "down 50% with intact catalyst" looks like value until the broader market sells off another 20% and your "value" becomes -70%. Required checks:

1. Macro regime gate — trigger macro-warning. Reversals work in 🟢 GREEN (recovering market lifts beaten-down names) and mid-late 🟡 YELLOW (capitulation phase). 🔴 RED → reversals are still falling knives. Don't recommend reversal buys in RED; flag as "watch list only" instead.
2. Insider must be slowing sells or starting to buy — $(ls ~/.claude/{skills,plugins/claude-investment-skills}/review-investment-screenshot/scripts/insider_ratio.py 2>/dev/null | head -1) TICKER --window 180 (180d for reversals — see the trend over 2 quarters, not just 90d). The ORCL signal was: pre-crash 8 sells / 2 buys → post-crash 2 sells / 5 buys. Form 4 code "P" only.
3. First higher low CONFIRMED, not predicted — Don't pre-empt. Wait for: (a) 50DMA crossover OR (b) confirmed higher low on weekly. Pre-empting "looks bottomed" is how -30% becomes -50%.
4. 3-tier entry — T1 = first confirmed higher low; T2 = retest of capitulation low; T3 = full revisit (if it happens). Never "buy at market on a chart that looks bottomed."
5. Sizing 2-3% per pick — reversals are higher-risk than momentum names; don't size like core holdings.
6. Tax framing — reversal entries are positions, not swings; assume 12+ month hold. Frame return targets after-tax: +50% gross = +40-43% after LTCG.

"Look carefully" rule: most "beaten-down with intact catalyst" stocks are beaten down for a REASON the bull case denies. Always answer: "what would have to be true for the bear thesis to be correct?" If you can't articulate it, you don't understand the trade. Verified false reversals from 2026: WBA -60% (mgmt still selling), DLTR -45% (insiders also exited), KSS -50% (PE walked away).

See README's Hard Rules for the full anti-pattern list.

Goal

Find stocks where:

1. Worst-case is already priced in (down 30%+ from ATH)
2. Concrete catalyst still intact (real contracts, not just hope)
3. Reversal early signal (50DMA up-cross or first higher low)
4. Insider not capitulating (sells slowing or buying starting)
5. Forward valuation cheap (P/E < pre-crash 50%)

The ORCL pattern that delivered $172 → $185 reversal: down 50% from $345 + OpenAI $300B intact + insider selling slowing + 50DMA crossover.

Why this matters

Most "value" looks dead. But true narrative reversals (where the bear story is wrong) outperform:

• ORCL 2025/9 → 2026/5: -50% then +35% rebound
• META 2022 → 2023: -76% then +200%
• NFLX 2022 → 2023: -75% then +180%
• CRM 2022 → 2023: -55% then +90%

These all share: panic priced in maximum darkness then truth comes out.

The 5-Step Workflow

Step 1 — Define hunting ground

Common buckets where reversals happen:

• AI Cloud (ORCL after OpenAI doubts)
• Big Tech (META 2022 metaverse fear)
• Beaten retailers (NFLX 2022 streaming saturation fear)
• Software (CRM, ZM, DOCU after 2022 reset)
• Healthcare/Biotech after FDA rejection
• China after regulatory crackdown
• Auto after EV demand reset
• Banks after credit fear

Step 2 — Apply hard filters

Pull via mcp__yfmcp__yfinance_get_ticker_info for candidate list:

Hard cuts (must pass ALL):

Optional but strong:

• Recent earnings beat (sentiment shift)
• New CEO or strategy reset
• Activist investor involvement
• Big contract / partnership announcement

Step 3 — Look for reversal signals

For each survivor, check:

Step 4 — Verify catalyst is intact (CRITICAL)

The hardest part. Use WebSearch and earnings transcripts to verify:

Questions to ask:

1. Is the original thesis still true? (e.g., ORCL OpenAI $300B contract still active)
2. What's been added since the crash? (new contracts, customers)
3. Is management same/changed? (new CEO often = catalyst)
4. Have analysts started raising targets? (early signs of recognition)
5. Are insider buying? (ultimate signal)

Reject if catalyst is broken:

• Major customer lost
• Management change without coherent strategy
• Regulatory headwinds increased
• Competitive moat eroded

Step 5 — Check insider for capitulation/buying

Run insider_ratio.py "TICKER" --window 90 (or wider window covering capitulation date). Uses openinsider primary; only Form 4 code "P" counts as buy.

• 🟢🟢🟢 RECENT CLUSTER BUY (3+ insiders, $500K+ each): Bottom signal — most reversal candidates have this. Real 2026 example: NKE (CEO Hill + Tim Cook + 2 Directors, $3.7M, 7 days, after -46% drop).
• 🟢 STRONG BUY: 1-2 senior insiders buying after period of selling
• 🟡 OK: Selling slowed / stopped + sells are 10b5-1 trusts (verify at secform4.com)
• 🔴 AVOID: CEO/CFO ad-hoc selling (not 10b5-1) = haven't capitulated

Reminder: News articles' "cluster buy" claims are often false positives (RSU/DSU grants). Always verify Form 4 code = "P" at openinsider.com/[TICKER].

Especially good: CEO/CFO/Director cluster buy after stock down 50% (CEVA 2026 / NKE 2026 / AMKR Kim family / LSCC new CEO patterns).

Output format

# Narrative Reversal Screen — [Date]

## TL;DR
Found [N] candidates with intact catalyst + reversal signal. Top 3:
1. [TICKER] — [tagline]
2. [TICKER] — [tagline]
3. [TICKER] — [tagline]

## Screen Results

### Top 3 Deep Dive

#### #1 [TICKER]
**The Crash**: ATH $X (Date) → Low $Y (Date) = -Z%
**Why it crashed**: [1 sentence]
**The Recovery**: Current $A, +B% from low

**Catalyst Status**:
- Original thesis: [check if still true]
- Concrete evidence: [contracts, customers]
- New positives since crash: [list]

**Reversal signals**:
- 50DMA: [above/below + how recently crossed]
- First higher low: [yes/no, when]
- Insider: [buy ratio + key buyers]
- Analyst: [recent upgrades/raises]

**Valuation**:
- Pre-crash P/E: 35x
- Current P/E: 21x
- 50% multiple compression already
- Peer P/E: 28x → upside in re-rating

**Entry Plan**:
- Now: $A (try 30%)
- Pullback to 50DMA $B: add 30%
- Pullback to 200DMA $C: add 40%

**12-month target**: $D (+E%)

**Risk**: [main risk that would invalidate]

## Watch list (not yet entry signal but close)
| Ticker | Reason waiting |

## Rejected
| Ticker | Why rejected |
| TICKER | Catalyst actually broken |
| TICKER | Insider still capitulating |
| TICKER | Down 30% but PE still 60x |

Hard rules

1. Verify catalyst is INTACT. Don't catch falling knives. ORCL had OpenAI $300B verifiable; some falling stocks don't have anything.
2. Don't buy at exactly the bottom. Wait for first higher low + 50DMA cross.
3. Insider matters MORE here. In growth stocks insider is noise; in reversals it's THE signal (CEVA pattern).
4. Re-rating > earnings growth. ORCL went from PE 35 → 21 = -40%. Going back to 28-30 = +35% just on multiple, before earnings.
5. Cap position size at 5-7% (still risky, R/R asymmetric).
6. Set stop at recent low. If thesis breaks, exit fast.

Common pitfalls

Templates: Common reversal patterns

Pattern A: The "Worst-Case Priced In"

• ORCL 2026/5 (China=0 priced in for NVDA, OpenAI doubt for ORCL)
• META 2022 (metaverse + ad recession fears)
• Sign: forward P/E at multi-year low, but earnings stable

Pattern B: The "Activist or New CEO"

• INTC under Lip-Bu Tan (2026 turnaround attempt)
• DIS under Iger return (2022)
• Sign: new strategy = new buying

Pattern C: The "Sector Rotation Reversal"

• Energy 2020 → 2022 (oil $30 → $130)
• Bank 2023 (post-SVB collapse, then recovery)
• Sign: macro tailwind reasserts

Pattern D: The "Earnings Inflection"

• AMD 2023 (data center inflection)
• NVDA 2023 Q1 ER (AI catalyst surprise)
• Sign: first surprise beat after string of misses

Watch list management

Status categories:

• 🟢 BUY now — all 5 criteria pass
• 🟡 WATCH — 4 of 5 pass, waiting for trigger
• 🟠 STILL FALLING — early, wait for higher low
• 🔴 REJECTED — catalyst broken or value trap

Update cadence: Weekly review of WATCH list, daily for current entries.

When to invoke

• User asks: "Find beaten-down stocks with real story"
• User asks: "ORCL-style plays"
• User asks: "Reversal candidates"
• After SPX -10%+ correction (lots of opportunities open up)
• Quarterly: routine reversal hunting

Tool cheat-sheet

Companion skills

After this screens 3 candidates:

• Run analyze-stock for deep dive
• Run option-wall-analysis for short-term levels
• Run leaps-screen for LEAPS (LEAPS work GREAT for reversals — high IV after crash)
• Run tax-optimize if user wants to use as alternative to current holdings