33.85 +1.56 (+4.6%) Sell

DCP does a dead cat bounce, it's still too early to buy into it

13 min read

DCP MIDSTREAM, LP outperformed the broader market on Thursday. It increased by +4.6% to close at 33.85. It is currently trading -25% below it's 52 week high of 45.57.

[Themes containing DCP]

Buy-and-Hold investors in DCP experienced a maximum drawdown of -26.11% over the last three months. It fell by -15.78% during this strong bearish trending period. There were both Long and Short signals during this period, where the short signals were significantly more profitable than the long signals. The net profit from Short signals was +8.45%.


DCP has been underperforming the SP500 index in recent time. It showed significant outperformance (compared to the SP500 index) from 20 Jan, 2016 to 15 Feb, 2017. Over the last 2 years 11 months and 9 days, DCP outperformed the SP500 index on 49% days. Which indicates that on days DCP outperforms the SP500 index, it's performance is marginally better than on the days it underperforms the SP500 index.

During the last three months DCP was mostly loss making and delivered on average -0.24% per day. It's best return during this period (of +5.8%) was on Wednesday, 7 Nov, 2018. While it's worst loss in the same period (of -4.71%) was on Thursday, 6 Dec, 2018. The longest stort-term trend during this period was 12 losing days, which started on 17 Oct, 2018 and ended on 1 Nov, 2018. This bearish trend lost -16.66% of investor capital.

During the last year DCP had 4 profitable months and 8 loss making months. DCP returned profits in fewer months than SP500 index. DCP significantly outperformed SP500 index in May 2018, when it returned +14.01% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. DCP had a longer winning streak of losing months than SP500 index. It went down in 5 straight months (from Aug 2018 to Dec 2018) during which period it delivered -29.26%. It is interesting to note that both DCP and SP500 index significantly outperform during months when quarterly/annual results are announced.

Money won't create success, the freedom to make it will.
-- Nelson Mandela

DCP is currently seeing overall fall in volatility. In comparison, the SP500 index is seeing increase in volatility. During the last three months, there was a significant surge in DCP's volatility from 22 Oct, 2018 to 13 Nov, 2018. While there was a significant surge in the SP500 index's volatility from 14 Sep, 2018 to 29 Oct, 2018.

Advanced/professional short-term investors should note that DCP 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 DCP. Therefore, SP500 must receive a lower allocation than DCP in your portfolio. SP500 index usually has shorter drawdown period than DCP.

On a general note (since you are interested in DCP), three instruments that deserve special mention are I, HEAR and PRQR. They have all outperformed the market and must be closely watched for investment opportunities.

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