NETEASE, INC. (FOREIGN)

232.52 -5.92 (-2.54%) Buy

NTES investors check their stop-losses as it underperforms

13 min read

NETEASE, INC. (Foreign) is a falling knife that can bleed you if you catch it on Tuesday. It lost -2.54% to close at 232.52. It is currently trading -37% below it's 52 week high of 371.36.

[Themes containing NTES]

NTES is currently in a up trend. The previous long signal in NTES has not been profitable for investors in general. If you are invested in NTES at current levels please make sure that your allocation is limited and that your portfolio is well diversified.

Trend

NTES has been outperforming the SP500 index in recent time. Over the last 2 years 11 months and 14 days, NTES outperformed the SP500 index on 51% days.

NTES was profitable on 61% days in the last three months. During this time, it delivered on average +0.24% per day. It delivered it's worst daily return of -8.5%, during this period, on Wednesday, 24 Oct, 2018. There was initially a bearish trend during this period which started on 17 Oct, 2018 and went on till 19 Oct, 2018. The trend delivered -6.82% losses to investors. This was followed by a bullish trend that started on 30 Oct, 2018 and ended on 7 Nov, 2018. This bullish trend delivered +17.92% to investors.

NTES had 5 profitable and 7 loss making months over the last year. During the last year, NTES underperformed SP500 index on monthly return basis. NTES was also a more risky investment than SP500 index as it's worst month in the last year, Aug 2018, returned -23.37% compared to -7.75% returned by SP500 index in Dec 2018. NTES had a longer winning streak of losing months than SP500 index. It went down in 5 straight months (from Jan 2018 to May 2018) during which period it delivered -38.88%.

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

NTES 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 fall in NTES's volatility from 20 Sep, 2018 to 5 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 NTES has significant positive skewness in it's return distribution. This indicates that investors can expect NTES to recover from drawdowns quickly. Which makes NTES a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

Investors trading in NTES derivatives at this moment can consider 'Long Straddle' options strategy to receive better risk-adjusted returns.

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

On a general note (since you are interested in NTES), if you are an investor in IMTE, you need to be extra careful (consider limiting your exposure or diversifying) as it is extremely unpredictable and therefore risky.

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