F does a dead cat bounce, it's still too early to buy into it
14 Dec, 201813 min read
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FORD MOTOR CO outperformed the broader market today. It increased by +0.24% to close at 8.52. During the last week it delivered 0.0% and saw a maximum drawdown of -1.62% before bouncing back.
Buy-and-Hold investors in F experienced a maximum drawdown of -16.95% over the last three months. It delivered -10.79% during this strong bearish trending period. There were no long signals during this period, where the short signal generated good profits of +10.79% for investors.
F has been outperforming the SP500 index in recent time. It showed significant underperformance (compared to the SP500 index) from 4 Jan, 2016 to 3 Oct, 2018. Over the last 2 years 11 months and 10 days, F underperformed the SP500 index on 52% days.
During the last three months F was mostly loss making and delivered on average -0.16% per day. It's best return during this period (of +9.9%) was on Thursday, 25 Oct, 2018. While it's worst loss in the same period (of -4.77%) was on Wednesday, 24 Oct, 2018. The longest stort-term trends during this period were 5 profitable and losing days. The bullish trend (which returned +3.12%) started on 17 Sep, 2018 and went on till 21 Sep, 2018 while the bearish trend (which returned -4.59%) started on 16 Oct, 2018 and went on till 22 Oct, 2018.
The last 12 months saw F's investors making profits in 4 months and incurring losses in 8 months. F was less consistent in delivering monthly returs than SP500 index. F was also a more risky investment than SP500 index as it's worst month in the last year, Jan 2018, returned -13.35% compared to -7.28% returned by SP500 index in Oct 2018. F had a longer winning streak of losing months than SP500 index. It went down in 4 straight months (from Jun 2018 to Sep 2018) during which period it delivered -21.72%.
Don't tell me where your priorities are. Show me where you spend your money and I'll tell you what they are.
-- James W. Frick
F 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 F's volatility from 18 Sep, 2018 to 25 Oct, 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 F has significant positive skewness in it's return distribution. This indicates that investors can expect F to recover from drawdowns quickly. Which makes F a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.
Investors trading in F derivatives at this moment can consider 'Protective Collar' options strategy to receive better risk-adjusted returns.
SP500 index has more chance of extreme outcomes than F. Therefore, SP500 must receive a lower allocation than F in your portfolio. SP500 index usually has shorter drawdown period than F.
Based on your interest in F you may find it interesting to know that AMZN, MSFT and V are large caps that have all shown remarkable performance and qualify to be on every investor's watchlist.
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