118.36 +0.46 (+0.39%) Sell

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

13 min read

SWK delivered good returns today. On a longer term basis, investors in STANLEY BLACK & DECKER, INC. made -0.01% per day. Friday's performance of +0.39% was a significant outperformance compared to it's daily average.

[Themes containing SWK]

SWK showed a strong down trend over the last 3 months. During this period SWK lost -20.66% and saw a maximum drawdown of -29.74%. There were 3 short signals during this period that returned a cumulative of +7.71% to investors.


SWK has been underperforming the SP500 index in recent time, after having outperformed till 4 Dec, 2017. Over the last 2 years 11 months and 10 days, SWK underperformed the SP500 index on 47% days. Which indicates that on days SWK underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.

During the last three months SWK was mostly loss making and delivered on average -0.34% per day. It's best return during this period (of +5.97%) was on Thursday, 1 Nov, 2018. While it's worst loss in the same period (of -7.11%) was on Tuesday, 4 Dec, 2018. There was initially a bullish trend during this period which started on 17 Sep, 2018 and went on till 21 Sep, 2018. The bullish trend returned +3.42% to investors. This was followed by a bearish trend that started on 3 Oct, 2018 and ended on 10 Oct, 2018. This bearish trend lost -12.27% of investor capital.

SWK had 3 profitable and 9 loss making months over the last year. During the last year, SWK underperformed SP500 index on monthly return basis. SWK was also a more risky investment than SP500 index as it's worst month in the last year, Oct 2018, returned -20.88% compared to -7.28% returned by SP500 index in Oct 2018. SWK had a longer winning streak of losing months than SP500 index. It went down in 6 straight months (from Jan 2018 to Jun 2018) during which period it delivered -21.41%. It is interesting to note that both SWK and SP500 index significantly outperform during months when quarterly/annual results are announced.

Wealth is the ability to fully experience life.
-- Henry David Thoreau

SWK 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 surge in SWK's volatility from 17 Sep, 2018 to 1 Nov, 2018. While there was a significant surge in the SP500 index's volatility from 25 Sep, 2018 to 29 Oct, 2018.

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

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

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

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

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