Software THEME

1757.8 +5.15 (+0.29%) Sell

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

14 min read

Software has destroyed investor wealth on Tuesday. It gained +0.29% to close at 1757.8. It is currently trading -11% below it's 52 week high of 1994.92.

[Theme constituents]

~SOFTWARE showed a down trend over the last 3 months. During this period ~SOFTWARE returned -9.19% and saw a maximum drawdown of -14.1%. There was a short signal during this period which returned +2.36%.

Trend

~SOFTWARE has been outperforming the SP500 index in recent time. Over the last 2 years 11 months and 14 days, ~SOFTWARE outperformed the SP500 index on 59% days.

~SOFTWARE returned losses on 53% days in the last three months. During this time, it delivered on average -0.13% per day. It delivered it's worst daily return of -4.61%, during this period, on Wednesday, 10 Oct, 2018. There was initially a bullish trend during this period which started on 19 Sep, 2018 and went on till 28 Sep, 2018. The bullish trend returned +3.03% to investors. This was followed by a bearish trend that started on 4 Oct, 2018 and ended on 11 Oct, 2018. This bearish trend lost -9.7% of investor capital.

On monthly basis, ~SOFTWARE delivered profits in more months over the last year, than losses. ~SOFTWARE delivered profits less regularly than SP500 index. ~SOFTWARE was also a more risky investment than SP500 index as it's worst month in the last year, Oct 2018, returned -8.42% compared to -7.75% returned by SP500 index in Dec 2018. ~SOFTWARE and SP500 index, both had periods of 6 consecutive profitable months. It is interesting to note that both ~SOFTWARE and SP500 index significantly outperform during months when quarterly/annual results are announced.

"Beware of little expenses. A small leak will sink a great ship.

~SOFTWARE 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 ~SOFTWARE's volatility from 1 Oct, 2018 to 26 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 ~SOFTWARE has significant positive skewness in it's return distribution. This indicates that investors can expect ~SOFTWARE to recover from drawdowns quickly. Which makes ~SOFTWARE a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

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

On a general note (since you are interested in ~SOFTWARE), three large cap instruments that deserve special mention are CSCO, MSFT and V. They have all outperformed the market and must be closely watched for investment opportunities.

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