Looking to invest in SQ? Avoid at the moment as it was among the worst performers
13 Dec, 201813 min read
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SQUARE, INC. was among the worst performers on Thursday. It fell by -1.18% to close at 62.9. On a day when the overall market breadth was 35%, it closed higher than 2% of the market. In comparison, the benchmark SP500 index closed today at -0.0002%.
SQ showed a strong bearish trend over the last 3 months. During this period SQ fell by -30.74% and saw a maximum drawdown of -38.61%. There was a short signal during this period which returned +18.79%.
SQ has been underperforming the SP500 index in recent time. It showed significant outperformance (compared to the SP500 index) from 15 Jul, 2016 to 28 Sep, 2018. Over the last 2 years 11 months and 9 days, SQ outperformed the SP500 index on 56% days.
During the last three months SQ was mostly loss making and delivered on average -0.46% per day. It's best return during this period (of +10.82%) was on Tuesday, 25 Sep, 2018. While it's worst loss in the same period (of -11.73%) was on Tuesday, 4 Dec, 2018. The longest stort-term trends during this period were 4 profitable and losing days. The bullish trend (which returned +14.83%) started on 30 Oct, 2018 and went on till 2 Nov, 2018 while the bearish trend (which returned -12.39%) started on 3 Oct, 2018 and went on till 8 Oct, 2018.
During the last year SQ had 7 profitable months and 5 loss making months. SQ returned profits in fewer months than SP500 index. SQ significantly outperformed SP500 index in Aug 2018, when it returned +37.11% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. SQ had a shorter streak of profitable months than SP500 index. It only went up in 5 straight months during the last year.
The stock market clearly values companies that can deliver disruptive innovation.
-- Steve Blank
SQ is currently seeing overall increase in volatility. In comparison, the SP500 index is seeing increase in volatility. During the last three months, there was a significant surge in SQ's volatility from 14 Sep, 2018 to 10 Oct, 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 SQ has significant positive skewness in it's return distribution. This indicates that investors can expect SQ to recover from drawdowns quickly. Which makes SQ a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.
Investors trading in SQ derivatives at this moment can consider 'Married Put' options strategy to receive better risk-adjusted returns.
SP500 index has more chance of extreme outcomes than SQ. Therefore, SP500 must receive a lower allocation than SQ in your portfolio. SP500 index usually has shorter drawdown period than SQ.
On a general note (since you are interested in SQ), AMZN is a large cap that deserves to be closely tracked for investment opportunities.
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