157.52 +0.82 (+0.52%) Sell

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

13 min read

NSC was among the best performers today. On a longer term basis, investors in NORFOLK SOUTHERN CORP made -0.05% per day. Thursday's performance of +0.52% was a significant outperformance compared to it's daily average.

[Themes containing NSC]

Buy-and-Hold investors in NSC experienced a maximum drawdown of -16.71% over the last three months. It lost -12.2% during this strong down trending period. There were both Long and Short signals during this period, where the short signals were significantly more profitable than the long signals. The net profit from Short signals was +8.68%.


NSC has been underperforming the SP500 index in recent time, after having outperformed till 18 Sep, 2018. Over the last 2 years 11 months and 9 days, NSC outperformed the SP500 index on 55% days.

During the last three months NSC was mostly loss making and delivered on average -0.19% per day. It's best return during this period (of +4.14%) was on Tuesday, 18 Sep, 2018. While it's worst loss in the same period (of -5.55%) was on Wednesday, 10 Oct, 2018. There was initially a bearish trend during this period which started on 19 Sep, 2018 and went on till 26 Sep, 2018. The trend delivered -3.32% losses to investors. This was followed by a bullish trend that started on 30 Oct, 2018 and ended on 2 Nov, 2018. This bullish trend delivered +4.6% to investors.

NSC had 7 profitable and 5 loss making months over the last year. During the last year, NSC underperformed SP500 index on monthly return basis. NSC significantly outperformed SP500 index in Jul 2018, when it returned +11.03% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. NSC had a shorter streak of profitable months than SP500 index. It only went up in 3 straight months during the last year. It is interesting to note that both NSC and SP500 index significantly outperform during months when quarterly/annual results are announced.

I'm involved in the stock market, which is fun and, sometimes, very painful.
-- Regis Philbin

NSC 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 NSC's volatility from 28 Sep, 2018 to 11 Dec, 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 NSC has negative skewness in it's return distribution. This indicates that investors may need to stay invested through long periods of drawdown before expecting a recovery.

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

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

Based on your interest in NSC you may find it interesting to know that EHC, HQY and BURL are small caps that have all shown remarkable performance and qualify to be on every investor's watchlist.

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