MORGAN STANLEY

41.32 -1.25 (-3.03%) Sell

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

13 min read

MORGAN STANLEY is a falling knife that can bleed you if you catch it on Friday. It returned -3.03% to close at 41.32 which is it's 52 week low, down -29% from it's 52 week high.

[Themes containing MS]

Buy-and-Hold investors in MS experienced a maximum drawdown of -17.16% over the last three months. It returned -13.81% during this strong down trending period. There were no long signals during this period, where the short signal generated good profits of +13.81% for investors.

Trend

MS has been underperforming the SP500 index in recent time, after having outperformed till 12 Mar, 2018. Over the last 2 years 11 months and 3 days, MS outperformed the SP500 index on 50% days. Which indicates that on days MS outperforms the SP500 index, it's performance is marginally better than on the days it underperforms the SP500 index.

During the last three months MS was mostly loss making and delivered on average -0.22% per day. It's best return during this period (of +5.68%) was on Tuesday, 16 Oct, 2018. While it's worst loss in the same period (of -5.04%) was on Tuesday, 4 Dec, 2018. There was initially a bearish trend during this period which started on 21 Sep, 2018 and went on till 26 Sep, 2018. The trend delivered -4.44% losses to investors. This was followed by a bullish trend that started on 1 Oct, 2018 and ended on 4 Oct, 2018. This bullish trend delivered +1.5% to investors.

On monthly basis, MS delivered losses in more months over the last year, than profits. MS delivered profits less regularly than SP500 index. MS significantly outperformed SP500 index in Jan 2018, when it returned +8.35% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. MS had a longer winning streak of losing months than SP500 index. It went down in 5 straight months (from Feb 2018 to Jun 2018) during which period it delivered -15.04%. It is interesting to note that both MS and SP500 index significantly outperform during months when quarterly/annual results are announced.

Everyday is a bank account, and time is our currency. No one is rich, no one is poor, we've got 24 hours each.
-- Christopher Rice

MS is becoming more volatile overall. In comparison, the SP500 index is seeing a rise in volatility. During the last three months, there was a significant surge in MS's volatility from 10 Sep, 2018 to 14 Nov, 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 MS has significant positive skewness in it's return distribution. This indicates that investors can expect MS to recover from drawdowns quickly. Which makes MS a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

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

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

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

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