Communications THEME

1244.64 -6.81 (-0.55%) Sell

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COMMUNICATIONS THEME is a falling knife, continues to bleed every investor trying to catch it

14 min read

Communications was among the worst performers on Tuesday. It lost -0.55% to close at 1244.64. On a day when the overall market breadth was 34%, it closed higher than 71% of the market. In comparison, the benchmark SP500 index closed today at +0.01%.

[Theme constituents]

~COMMUNICATIONS is currently in a down trend. The current bearish signal has generated a profit of +8.61% for investors in the last three months.

Trend

~COMMUNICATIONS has been outperforming the SP500 index in recent time. Over the last 2 years 11 months and 14 days, ~COMMUNICATIONS underperformed the SP500 index on 45% days. Which indicates that on days ~COMMUNICATIONS underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.

During the last three months ~COMMUNICATIONS was mostly loss making and delivered on average -0.13% per day. It's best return during this period (of +2.58%) was on Wednesday, 31 Oct, 2018. While it's worst loss in the same period (of -4.15%) was on Wednesday, 24 Oct, 2018. There was initially a bearish trend during this period which started on 17 Oct, 2018 and went on till 24 Oct, 2018. The trend delivered -6.3% losses to investors. This was followed by a bullish trend that started on 30 Oct, 2018 and ended on 1 Nov, 2018. This bullish trend delivered +6.71% to investors.

~COMMUNICATIONS had 4 profitable and 8 loss making months over the last year. During the last year, ~COMMUNICATIONS underperformed SP500 index on monthly return basis. ~COMMUNICATIONS was also a less risky investment than SP500 index as it's worst month in the last year, Dec 2018, returned -5.86% compared to -7.75% returned by SP500 index in Dec 2018. ~COMMUNICATIONS had a longer winning streak of losing months than SP500 index. It went down in 4 straight months (from Jul 2018 to Oct 2018) during which period it delivered -7.04%. It is interesting to note that both ~COMMUNICATIONS and SP500 index significantly outperform during months when quarterly/annual results are announced.

"The underlying principles of sound investment should not alter from decade to decade, but the application of these principles must be adapted to significant changes in the financial mechanisms and climate.

~COMMUNICATIONS 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 ~COMMUNICATIONS's volatility from 3 Oct, 2018 to 1 Nov, 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 ~COMMUNICATIONS has significant positive skewness in it's return distribution. This indicates that investors can expect ~COMMUNICATIONS to recover from drawdowns quickly. Which makes ~COMMUNICATIONS a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

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

On a general note (since you are interested in ~COMMUNICATIONS), two small cap instruments that deserve special mention are AAXN and ZBRA. They have significantly outperformed the overall market.

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