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3-Month Momentum Switch on XLK

Q: Did 3-month momentum beat buy-and-hold on XLK?

Over 2021-01-04 to 2026-10-02, 3-month momentum on XLK returned 6.1% annualized vs 22.1% for buy-and-hold: it trailed buy-and-hold by 16.0% per year, with a maximum drawdown 2.1 points shallower than holding (30.9% vs 33.0%).

Q: How many trades did it make?

18 completed round trips over 5.7 years (37 fills), with 33% of round trips closing profitably.

Q: Why 63 days?

63 trading days is about one quarter, a common momentum lookback. You can sweep it in DeployQuant to see how the horizon changes results.

Technology Select Sector SPDR Fund: S&P 500 technology stocks, the sector behind most recent bull runs. Backtest 2021-01-04 to 2026-10-02, $10,000 starting capital, computed by the same engine that runs live DeployQuant strategies.

Result: 3-month momentum on XLK turned $10,000 into $14,022 (40.2% total, 6.1% CAGR): it trailed buy-and-hold by 16.0% per year, with a maximum drawdown 2.1 points shallower than holding (30.9% vs 33.0%).

6.1%CAGR

22.1%buy & hold CAGR

−30.9%max drawdown

0.45Sharpe ratio

18round trips

33%win rate

■ 3-month momentum ■ buy & hold, $10,000 invested 2021-01-04

Year by year

Year	3-month momentum	buy & hold
2021	16.6%	36.1%
2022	−21.7%	−27.2%
2023	41.7%	54.6%
2024	−16.8%	21.3%
2025	12.9%	24.3%
2026	15.4%	38.9%

Month by month

Year	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
2021	0.0%	0.0%	0.0%	1.6%	−4.9%	6.7%	3.8%	3.5%	−5.7%	3.8%	4.3%	3.2%
2022	−9.5%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	−5.7%	−8.2%	0.0%	0.0%	0.0%
2023	4.3%	0.4%	10.7%	−0.1%	8.8%	6.0%	2.5%	−1.5%	−3.9%	0.0%	5.1%	4.1%
2024	2.6%	4.6%	0.8%	−6.8%	−1.4%	0.5%	−3.2%	−9.9%	−5.4%	−3.6%	5.0%	−0.3%
2025	−2.9%	−5.7%	0.0%	0.0%	0.0%	8.3%	3.6%	0.0%	7.4%	6.5%	−4.7%	0.7%
2026	−2.5%	0.0%	0.0%	3.4%	19.3%	−0.2%	−7.8%	3.7%	−1.6%	2.0%	–	–

Every trade

3-month momentum on XLK made 18 closed round trips and one position still open at the end of the test, an average hold of 69 days, an average winner of 15.87%, an average loser of −4.30%, a profit factor of 1.67, a longest losing streak of 6. It held a position at the close on 59.2% of trading days.

Entry	Entry price	Exit	Exit price	Return	Days held
2021-04-07	$66.02	2021-05-11	$63.81	−3.4%	34
2021-05-27	$66.58	2021-10-05	$71.67	7.6%	131
2021-10-18	$74.62	2022-01-21	$75.81	1.6%	95
2022-08-10	$71.55	2022-08-30	$67.35	−5.9%	20
2022-09-13	$65.83	2022-09-23	$60.29	−8.4%	10
2023-01-03	$61.19	2023-01-05	$59.86	−2.2%	2
2023-01-11	$62.12	2023-09-18	$82.55	32.9%	250
2023-11-10	$86.30	2024-04-22	$95.50	10.7%	164
2024-05-21	$105.11	2024-06-03	$104.34	−0.7%	13
2024-06-13	$111.83	2024-08-06	$98.93	−11.5%	54
2024-08-20	$110.84	2024-09-04	$102.62	−7.4%	15
2024-10-23	$114.11	2025-01-13	$111.72	−2.1%	82
2025-02-07	$116.82	2025-02-12	$115.27	−1.3%	5
2025-02-21	$119.49	2025-02-26	$114.02	−4.6%	5
2025-06-03	$115.87	2026-01-09	$143.78	24.1%	220
2026-01-13	$146.38	2026-01-21	$142.32	−2.8%	8
2026-04-17	$153.64	2026-08-25	$181.79	18.3%	130
2026-09-11	$187.04	2026-09-15	$184.46	−1.4%	4
2026-09-23	$196.14	open	–	1.9%	–

Prices are adjusted for splits and dividends, so they sit below the quotes printed at the time. An open position is marked at the last close.

Largest drawdowns

Peak	Low point	Depth	Days to low	Recovered	Days to recover
2024-03-12	2025-02-25	−30.9%	350	2026-05-26	455
2021-12-27	2023-01-05	−24.6%	374	2023-06-12	158
2026-06-02	2026-07-29	−15.5%	57	not yet	–

Buy-and-hold's deepest drawdown ran from 2021-12-27 to 2022-10-12 and reached −33.0%.

With trading costs

The headline run fills at the bar price. These runs charge slippage on every fill.

Slippage per fill	CAGR	Max drawdown	Final value	Sharpe
None (headline)	6.1%	−30.9%	$14,022	0.45
5 basis points	5.7%	−31.3%	$13,781	0.43
10 basis points	5.4%	−31.7%	$13,539	0.41

Changing the parameters

Version	CAGR	Max drawdown	Round trips	Win rate	Final value
Published rules	6.1%	−30.9%	18	33%	$14,022
Enter above 0%	7.6%	−35.4%	36	42%	$15,213
Enter above 10%	7.5%	−19.6%	10	60%	$15,141
Enter above 15%	3.1%	−20.9%	8	50%	$11,889

How XLK behaved

Measure	XLK
Data in this test	2021-01-04 to 2026-10-02 (1444 sessions)
Total return, buy and hold	226.1%
Annualized volatility	25.1%
Deepest drawdown	−33.6% (2021-12-27 to 2022-10-12)
Up days	55.2%
Average daily range	1.77%
Average overnight gap	0.69%
Correlation to SPY	0.91
Correlation to QQQ	0.97
Correlation to TLT	0.07
Sessions above the 200-day average	76.5%
Crossings of the 200-day average	22
Falls of 10% or more from a 20-day high	30

The rules

Hold while the trailing 3-month return is positive (above +5% to enter, below 0% to exit).

WHEN the market opens · IF not invested AND the 63-day return > +5% · THEN buy with 98% of the sleeve
WHEN the market opens · IF invested AND the 63-day return < 0% · THEN sell the whole position

Time-series momentum on a quarterly lookback, the horizon much of the academic momentum literature uses. The template enters after a +5% three-month run and exits when the same measure turns negative. The gap between entry (+5%) and exit (0%) is a buffer against flip-flopping around a single threshold.

Good for: assets with long, persistent cycles, such as index, sector and managed-futures ETFs.
Watch out: a three-month lookback is slow; V-shaped crashes and recoveries can see it exit near the bottom and re-enter well off the low.

Run 3-month momentum on XLK yourself, free →

Build it from blocks (or type it in English), backtest it on 5.7 years of minute data in seconds, tweak any parameter, then paper trade it on live data. No card, no broker needed to start.

Frequently asked questions

Did 3-month momentum beat buy-and-hold on XLK?