21.57 +0.17 (+0.79%) Sell

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

13 min read

MT delivered stellar performance today. On a longer term basis, investors in ARCELORMITTAL (Foreign) made -0.02% per day. Tuesday's performance of +0.79% was a significant outperformance compared to it's daily average.

[Themes containing MT]

MT showed a strong down trend over the last 3 months. During this period MT returned -25.52% and saw a maximum drawdown of -34.3%. There were 2 short signals during this period that returned a cumulative of +19.68% to investors.


MT has been underperforming the SP500 index in recent time, after having outperformed till 12 Jan, 2018. Over the last 2 years 11 months and 7 days, MT outperformed the SP500 index on 51% days.

MT returned losses on 54% days in the last three months. During this time, it delivered on average -0.44% per day. It delivered it's worst daily return of -8.58%, during this period, on Wednesday, 24 Oct, 2018. There was initially a bullish trend during this period which started on 13 Sep, 2018 and went on till 20 Sep, 2018. The bullish trend returned +11.31% to investors. This was followed by a bearish trend that started on 18 Oct, 2018 and ended on 24 Oct, 2018. This bearish trend lost -16.3% of investor capital.

On monthly basis, MT delivered losses in more months over the last year, than profits. MT delivered profits less regularly than SP500 index. MT was also a more risky investment than SP500 index as it's worst month in the last year, Oct 2018, returned -20.1% compared to -7.28% returned by SP500 index in Oct 2018. MT had a longer winning streak of losing months than SP500 index. It went down in 3 straight months (from Oct 2018 to Dec 2018) during which period it delivered -33.9%. It is interesting to note that both MT and SP500 index significantly outperform during months when quarterly/annual results are announced.

I never dreamed about success, I worked for it.
-- Estee Lauder

MT 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 MT's volatility from 3 Oct, 2018 to 7 Dec, 2018. While there was a significant surge in the SP500 index's volatility from 13 Sep, 2018 to 29 Oct, 2018.

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

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

Based on your interest in MT you may find it interesting to know that AMRH has shown remarkable performance and deserves to be on every investors' watchlist.

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