129.47 -3.68 (-2.84%) Sell

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

13 min read

ILLINOIS TOOL WORKS INC was among the worst performers on Friday. It fell by -2.84% to close at 129.47. It is currently trading -27% below it's 52 week high of 178.88.

[Themes containing ITW]

ITW showed a bearish trend over the last 3 months. During this period ITW fell by -9.11% and saw a maximum drawdown of -19.27%. There were 2 short signals during this period that returned a cumulative of +0.94% to investors.


ITW has been outperforming the SP500 index in recent time. It showed significant outperformance (compared to the SP500 index) from 14 Jan, 2016 to 30 Nov, 2017. Over the last 2 years 11 months and 3 days, ITW outperformed the SP500 index on 55% days.

During the last three months ITW delivered profits on 53% days. However, it still managed to end this period in a loss. It's best return during this period (of +3.08%) was on Tuesday, 30 Oct, 2018. While it's worst loss in the same period (of -5.33%) was on Wednesday, 24 Oct, 2018. The longest stort-term trend during this period was 8 profitable days, which started on 12 Sep, 2018 and went on till 21 Sep, 2018. This bullish trend returned +4.78% to investors.

During the last year ITW had 5 profitable months and 7 loss making months. ITW returned profits in fewer months than SP500 index. ITW was also a more risky investment than SP500 index as it's worst month in the last year, Oct 2018, returned -10.88% compared to -7.28% returned by SP500 index in Oct 2018. ITW had a longer winning streak of losing months than SP500 index. It went down in 3 straight months (from Feb 2018 to Apr 2018) during which period it delivered -17.09%. It is interesting to note that both ITW and SP500 index significantly outperform during months when quarterly/annual results are announced.

Anybody who plays the stock market not as an insider is like a man buying cows in the moonlight.
-- Daniel Drew

ITW 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 ITW's volatility from 21 Sep, 2018 to 31 Oct, 2018. While there was a significant surge in the SP500 index's volatility from 10 Sep, 2018 to 29 Oct, 2018.

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

Investors trading in ITW derivatives at this moment can consider 'Calendar Spread' options strategy to receive better risk-adjusted returns.

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

Based on your interest in ITW you may find it interesting to know that BK, IFF and WMT have all performed similar to ITW and qualify as alternative investment candidates that must be evaluated for diversification.

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