328.9 +5.96 (+1.81%) Sell

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

13 min read

ILLUMINA INC outperformed the broader market today. It increased by +1.81% to close at 328.9. During the last week it delivered -1.59% and saw a maximum drawdown of -3.86% before bouncing back.

[Themes containing ILMN]

ILMN is currently in a bearish trend. The current bearish signal has generated a profit of +0.19% for investors in the last three months.


ILMN has been outperforming the SP500 index in recent time. It showed significant outperformance (compared to the SP500 index) from 9 Dec, 2016 to 27 Sep, 2018. Over the last 2 years 11 months and 7 days, ILMN outperformed the SP500 index on 50% days. Which indicates that on days ILMN outperforms the SP500 index, it's performance is marginally better than on the days it underperforms the SP500 index.

During the last three months ILMN delivered profits on 52% days. However, it still managed to end this period in a loss. It's best return during this period (of +6.18%) was on Wednesday, 7 Nov, 2018. While it's worst loss in the same period (of -7.74%) was on Wednesday, 24 Oct, 2018. The longest stort-term trend during this period was 8 losing days, which started on 1 Oct, 2018 and ended on 10 Oct, 2018. This bearish trend lost -18.21% of investor capital.

The last 12 months saw ILMN's investors making profits in 9 months and incurring losses in 3 months. During the last year, ILMN delivered profits in more months than SP500 index. ILMN significantly outperformed SP500 index in Jul 2018, when it returned +16.24% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. ILMN had a longer winning streak of profitable months than SP500 index. It went up in 7 straight months (from Mar 2018 to Sep 2018) during which period it delivered +53.13%. It is interesting to note that both ILMN and SP500 index significantly outperform during months when quarterly/annual results are announced.

Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years.
-- Warren Buffett

ILMN 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 ILMN's volatility from 13 Sep, 2018 to 30 Oct, 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 ILMN has significant positive skewness in it's return distribution. This indicates that investors can expect ILMN to recover from drawdowns quickly. Which makes ILMN a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

Investors trading in ILMN 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 ILMN. Therefore, SP500 must receive a lower allocation than ILMN in your portfolio. ILMN usually has shorter drawdown period than the SP500 index.

On a general note (since you are interested in ILMN), three instruments that have performed similar to ILMN are NTIP, DFRG and TGP. They must all be evaluated as alternative investment options and for diversification.

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