In the last five trading days (September 16 – September 22) the broad stock market extended its downtrend following two-week-long consolidation. The S&P 500 index set new record high of 3,588.11 on September 2. But then the market fell below February 19 high of 3,393.52. On Monday it set a local low of 3,229.10 before bouncing back above 3,300 mark again. So far, the recent decline still looks like a downward correction of a 63.7% rally from March 23 corona virus low at 2,191.86.
The S&P 500 index has lost 2.80% between September 16 and September 22. In the same period of time our five long and five short stock picks have lost 1.17%. So stock picks were relatively stronger than the broad stock market. Our long stock picks have lost 4.49%, but short stock picks have resulted in a gain of 2.15%.
There are risks that couldn’t be avoided in trading. Hence the need for proper money management and a relatively diversified stock portfolio. This is especially important if trading on a time basis – without using stop-loss/ profit target levels. We are just buying or selling stocks at open on Wednesday and selling or buying them back at close on the next Tuesday.
If stocks were in a prolonged downtrend, being able to profit anyway, would be extremely valuable. Of course, it’s not the point of our Stock Pick Updates to forecast where the general stock market is likely to move, but rather to provide you with stocks that are likely to generate profits regardless of what the S&P does.
This means that our overall stock-picking performance can be summarized on the chart below. The assumptions are: starting with $100k, no leverage used. The data before Dec 24, 2019 comes from our internal tests and data after that can be verified by individual Stock Pick Updates posted on our website.
Below we include statistics and the details of our three recent updates:
- September 22, 2020
Long Picks (September 16 open – September 22 close % change): CF (-5.53%), ROST (-4.54%), SPG (-8.33%), XOM (-2.55%), CME (-1.50%)
Short Picks (September 16 open – September 22 close % change): MPC (-0.86%), JPM (-5.19%), ETR (+1.03%), SHW (-3.12%), MCD (-2.59%)Average long result: -4.49%, average short result: +2.15%
Total profit (average): -1.17%
- September 15, 2020
Long Picks (September 9 open – September 15 close % change): UAA (+7.37%), EFX (-3.77%), CF (+2.30%), SLB (-1.52%), INTC (+0.95%)
Short Picks (September 9 open – September 15 close % change): PSX (+0.02%), GLW (+0.98%), EIX (-0.37%), MCD (+3.43%), RTX (+2.79%)Average long result: +1.07%, average short result: -1.37%
Total profit (average): -0.15%
- September 8, 2020
Long Picks (September 2 open – September 8 close % change): CSCO (-4.85%), DIS (+0.43%), MAR (+0.68%), WEC (+2.00%), PXD (-8.20%)
Short Picks (September 2 open – September 8 close % change): SO (+2.09%), PSX (-1.08%), PEAK (-0.47%), NVDA (-18.98%), FB (-9.27%)Average long result: -1.99%, average short result: +5.54%
Total profit (average): +1.78%
Let’s check which stocks could magnify S&P’s gains in case it rallies, and which stocks would be likely to decline the most if S&P plunges. Here are our stock picks for the Wednesday, September 23 – Tuesday, September 29 period.
We will assume the following: the stocks will be bought or sold short on the opening of today’s trading session (September 23) and sold or bought back on the closing of the next Tuesday’s trading session (September 29).
We will provide stock trading ideas based on our in-depth technical and fundamental analysis, but since the main point of this publication is to provide the top 5 long and top 5 short candidates (our opinion, not an investment advice) for this week, we will focus solely on the technicals. The latter are simply more useful in case of short-term trades.
First, we will take a look at the recent performance by sector. It may show us which sector is likely to perform best in the near future and which sector is likely to lag. Then, we will select our buy and sell stock picks.
There are eleven stock market sectors: Energy, Materials, Industrials, Consumer Discretionary, Consumer Staples, Health Care, Financials, Technology, Communications Services, Utilities and Real Estate. They are further divided into industries, but we will just stick with these main sectors of the stock market.
We will analyze them and their relative performance by looking at the Select Sector SPDR ETF’s.
Based on the above, we decided to choose our stock picks for the next week. We will choose our top 3 long and top 3 short candidates using trend-following approach, and top 2 long and top 2 short candidates using contrarian approach:
- buys: 1 x Materials, 1 x Industrials, 1 x Consumer Discretionary
- sells: 1 x Energy, 1 x Health Care, 1 x Communication Services
Contrarian approach (betting against the recent trend):
- buys: 1 x Energy, 1 x Health Care
- sells: 1 x Materials, 1 x Industrials
Top 3 Buy Candidates
MLM Martin Marietta Materials – Materials
- Stock trades within a possible medium-term bull flag pattern – uptrend continuation play
- The resistance level is at $230, marked by previous highs
MAS Masco Corp. – Industrials
- Possible bull flag pattern and uptrend continuation
- The resistance level of $60
- The support level is at $54
ROST Ross Stores, Inc. – Consumer Discretionary
- Stock trades within a possible medium-term bull flag pattern
- The resistance level of $97.5
- The support level is at $87.5
- Uptrend continuation play
Summing up, the above trend-following long stock picks are just a part of our whole Stock Pick Update. The Materials, Industrials and Consumer Discretionary sectors were relatively the strongest in the last 30 days. So that part of our ten long and short stock picks is meant to outperform in the coming days if the broad stock market acts similarly as it did before.
We hope you enjoyed reading the above free analysis, and we encourage you to read today’s Stock Pick Update – this analysis’ full version. There, we include the stock market sector analysis for the past month and remaining long and short stock picks for the next week. There’s no risk in subscribing right away, because there’s a 30-day money back guarantee for all our products, so we encourage you to subscribe today.
For a look at all of today’s economic events, check out our economic calendar.
Stock Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care
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All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.