BLUE does a dead cat bounce, it's still too early to buy into it
14 Dec, 201813 min read
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BLUEBIRD BIO, INC. delivered stellar performance on Friday. It gained +1.45% to close at 103.39. It is currently trading -55% below it's 52 week high of 233.05.
Buy-and-Hold investors in BLUE experienced a maximum drawdown of -30.2% over the last three months. It lost -24.64% during this strong down trending period. There were no long signals during this period, where the short signal generated good profits of +24.64% for investors.
BLUE has been underperforming the SP500 index in recent time, after having outperformed till 12 Mar, 2018. Over the last 2 years 11 months and 10 days, BLUE outperformed the SP500 index on 51% days.
BLUE returned losses on 56% days in the last three months. During this time, it delivered on average -0.38% per day. It delivered it's best daily return of +13.47%, during this period, on Thursday, 1 Nov, 2018. There was initially a bullish trend during this period which started on 30 Oct, 2018 and went on till 5 Nov, 2018. The bullish trend returned +27.38% to investors. This was followed by a bearish trend that started on 30 Nov, 2018 and ended on 10 Dec, 2018. This bearish trend lost -19.83% of investor capital.
BLUE had 6 profitable and 6 loss making months over the last year. During the last year, BLUE underperformed SP500 index on monthly return basis. BLUE was also a more risky investment than SP500 index as it's worst month in the last year, Oct 2018, returned -18.53% compared to -7.28% returned by SP500 index in Oct 2018. BLUE had a shorter streak of profitable months than SP500 index. It only went up in 2 straight months during the last year. It is interesting to note that both BLUE and SP500 index significantly outperform during months when quarterly/annual results are announced.
Success is walking from failure to failure with no loss of enthusiasm.
-- Winston Churchill
BLUE is becoming less volatile overall. In comparison, the SP500 index is seeing a rise in volatility. During the last three months, there was a significant fall in BLUE's volatility from 17 Sep, 2018 to 26 Sep, 2018. While there was a significant surge in the SP500 index's volatility from 25 Sep, 2018 to 29 Oct, 2018.
Advanced/professional short-term investors should note that BLUE has negative skewness in it's return distribution. This indicates that investors may need to stay invested through long periods of drawdown before expecting a recovery.
SP500 index has more chance of extreme outcomes than BLUE. Therefore, SP500 must receive a lower allocation than BLUE in your portfolio. SP500 index usually has shorter drawdown period than BLUE.
On a general note (since you are interested in BLUE), three instruments that have performed similar to BLUE are NKTR, QUOT and AXSM. They must all be evaluated as alternative investment options and for diversification.
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