124.27 -0.2 (-0.16%) Sell

CAT is a falling knife, continues to bleed every investor trying to catch it

13 min read

CAT was among the worst performers today. On a longer term basis, investors in CATERPILLAR INC made -0.0% per day. Tuesday's performance of -0.16% was a underperformance compared to it's daily average.

[Themes containing CAT]

CAT showed a strong bearish trend over the last 3 months. During this period CAT delivered -18.65% and saw a maximum drawdown of -29.0%. There was a short signal during this period which returned +5.37%.


CAT has been outperforming the SP500 index in recent time. It showed significant outperformance (compared to the SP500 index) from 25 Jan, 2016 to 12 Jan, 2018. Over the last 2 years 11 months and 14 days, CAT outperformed the SP500 index on 52% days.

CAT returned losses on 56% days in the last three months. During this time, it delivered on average -0.29% per day. It delivered it's worst daily return of -7.56%, during this period, on Tuesday, 23 Oct, 2018. The longest stort-term trend during this period was 7 profitable days, which started on 30 Oct, 2018 and went on till 7 Nov, 2018. This bullish trend returned +17.26% to investors.

The last 12 months saw CAT's investors making profits in 6 months and incurring losses in 6 months. CAT was less consistent in delivering monthly returs than SP500 index. CAT was also a more risky investment than SP500 index as it's worst month in the last year, Oct 2018, returned -20.33% compared to -7.75% returned by SP500 index in Dec 2018. CAT 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 CAT and SP500 index significantly outperform during months when quarterly/annual results are announced.

You must gain control over your money or the lack of it will forever control you.
-- Dave Ramsey

CAT is currently seeing overall increase in volatility. In comparison, the SP500 index is seeing increase in volatility. During the last three months, there was a significant surge in CAT's volatility from 26 Sep, 2018 to 29 Oct, 2018. While there was a significant surge in the SP500 index's volatility from 19 Sep, 2018 to 29 Oct, 2018.

Advanced/professional short-term investors should note that CAT has significant positive skewness in it's return distribution. This indicates that investors can expect CAT to recover from drawdowns quickly. Which makes CAT a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

Investors trading in CAT derivatives at this moment can consider 'Covered Call' options strategy to receive better risk-adjusted returns.

SP500 index has more chance of extreme outcomes than CAT. Therefore, SP500 must receive a lower allocation than CAT in your portfolio. SP500 index usually has shorter drawdown period than CAT.

Based on your interest in CAT you may find it interesting to know that HEAR has shown remarkable performance this year and deserves to be on every investors' watchlist.

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