10.34 +0.12 (+1.17%) Sell

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

13 min read

LUMBER LIQUIDATORS HOLDINGS, INC. delivered stellar performance on Tuesday. It gained +1.17% to close at 10.34. It is currently trading -67% below it's 52 week high of 31.93.

[Themes containing LL]

LL showed a strong down trend over the last 3 months. During this period LL lost -41.48% and saw a maximum drawdown of -42.84%. There was a short signal during this period which returned +42.16%.


LL has been underperforming the SP500 index in recent time, after having outperformed till 8 Sep, 2017. Over the last 2 years 11 months and 14 days, LL underperformed the SP500 index on 51% days.

LL returned losses on 67% days in the last three months. During this time, it delivered on average -0.81% per day. It delivered it's worst daily return of -8.85%, during this period, on Tuesday, 2 Oct, 2018. There was initially a bullish trend during this period which started on 19 Sep, 2018 and went on till 21 Sep, 2018. The bullish trend returned +0.39% to investors. This was followed by a bearish trend that started on 3 Dec, 2018 and ended on 14 Dec, 2018. This bearish trend lost -21.4% of investor capital.

LL had 4 profitable and 8 loss making months over the last year. During the last year, LL underperformed SP500 index on monthly return basis. LL was also a more risky investment than SP500 index as it's worst month in the last year, Oct 2018, returned -22.74% compared to -7.75% returned by SP500 index in Dec 2018. LL had a longer winning streak of losing months than SP500 index. It went down in 4 straight months (from Jul 2018 to Oct 2018) during which period it delivered -63.33%.

Financial peace isn't the acquisition of stuff. It's learning to live on less than you make, so you can give money back and have money to invest. You can't win until you do this.
-- Dave Ramsey

LL is becoming less volatile overall. In comparison, the SP500 index is seeing a rise in volatility. During the last three months, there was a significant surge in LL's volatility from 21 Sep, 2018 to 30 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 LL has significant positive skewness in it's return distribution. This indicates that investors can expect LL to recover from drawdowns quickly. Which makes LL a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

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

On a general note (since you are interested in LL), two instruments that deserve special mention are I and TPNL. They have significantly outperformed the overall market this year.

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