The broad stock market has retraced some of its recent rally last week (April 15 - April 21). On March 23 it sold off to the new medium-term low of 2,191.86. It was a stunning 35.4% below February 19 record high of 3,393.52. The corona virus and economic slowdown fears have erased more than a third of the broad stock market value! Then we saw huge come-back rally, as the S&P 500 index got back close to 2,850 mark. Is this a new uptrend or just upward correction before another leg down? The recent days' trading action brought some doubt about the medium-term bullish outlook. We will likely see more short-term volatility.

The S&P 500 index has lost 2.11% since last Wednesday's open. In the same period of time our five long and five short stock picks have lost 2.04%. So our stock picks were relatively very slightly stronger than the broad stock market. Long stock picks have lost 6.16% and short stock picks have resulted in a gain of 2.07%. The overall results remain relatively better than the S&P 500 index over last weeks.

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:

• Apr 21, 2020
  Long Picks (Apr 15 open - Apr 21 close % change): V (-4.84%), IP (-7.49%), SLB (+0.14%), LHX (-5.38%), FRT (-13.23%)
  Short Picks (Apr 15 open - Apr 21 close % change): BA (-1.92%), EQIX (-0.82%), NEE (-1.92%), HPQ (-6.97%), NEM (+1.25%)
  
  Average long result: -6.16%, average short result: +2.07%
  Total profit (average): -2.04%
• Apr 14, 2020
  Long Picks (Apr 8 open - Apr 14 close % change): WAT (+1.70%), WBA (+7.36%), AMD (+14.27%), MRO (+8.70%), VNO (+17.17%)
  Short Picks (Apr 8 open - Apr 14 close % change): CVX (+2.82%), EXR (-1.31%), ICE (+4.58%), HUM (+8.43%), PEP (+6.76%)
  
  Average long result: +9.84%, average short result: -4.26%
  Total profit (average): +2.79%
• Apr 7, 2020
  Long Picks (Apr 1 open - Apr 7 close % change): PFE (+5.29%), KR (+5.15%), ANSS (+7.40%), SLB (+25.82%), WFC (+6.48%)
  Short Picks (Apr 1 open - Apr 7 close % change): COG (+8.89%), MCO (+13.26%), MMM (+9.55%), IDXX (+5.86%), EL (+6.63%)
  
  Average long result: +10.03%, average short result: -8.84%
  Total profit (average): +0.59%

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, April 22 - Tuesday, April 28 period.

We will assume the following: the stocks will be bought or sold short on the opening of today's trading session (April 22) and sold or bought back on the closing of the next Tuesday's trading session (April 28).

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.

Let's start with our first charts (charts courtesy of www.stockcharts.com).

There's S&P 500's 30-minute chart along with market sector indicators for the past month. The S&P 500 index has gained 13.57% from the closing price on March 19. The strongest sector was Energy XLE, as it gained 29.03%. The Consumer Discretionary XLY gained 19.96% and Health Care XLV gained 18.23%.

On the other hand, the weakest sector was Consumer Staples XLP, as it gained "just" 8.54% in a month. The Financials XLF gained 9.55% and Communication Services gained 10.61%.

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:

Trend-following approach:

• buys: 1 x Energy, 1 x Consumer Discretionary, 1 x Health Care
• sells: 1 x Consumer Staples, 1 x Financials, 1 x Communication Services

Contrarian approach (betting against the recent trend):

• buys: 1 x Consumer Staples, 1 x Financials
• sells: 1 x Energy, 1 x Consumer Discretionary

Trend-following approach

Top 3 Buy Candidates

SLB Schlumberger Ltd. - Energy

• Consolidation following early April breaking above downward trend line
• Resistance level of $19 (upside profit target level)

EXPE Expedia, Inc. - Consumer Discretionary

• Stock trades within a bull flag pattern following early April advance
• The resistance level at $70-75 (upside profit target level if it breaks higher)

LH Laboratory Corporation of America Holdings - Health Care

• Breakout above the bull flag pattern so the advance may continue
• The resistance level of $160-170 and the support level of $125

Top 3 Sell Candidates

WMT Walmart Inc. - Consumer Staples

• Possible medium-term topping pattern
• Stock broke below the steep upward trend line
• The support level is at $118-126 (downside profit target level)

NDAQ Nasdaq OMX Group Inc. - Financials

• Stock broke below the upward trend line
• Potential topping pattern
• The support level of $95-100 - downside profit target level

VZ Verizon Communications - Communication Services

• Potential topping pattern - rising wedge
• Downward correction play
• The support level of $55 - downside profit target level

Contrarian approach

Top 2 Buy Candidates

COTY Coty Inc. - Consumer Staples

• Stock remains above its upward trend line
• Potential bull flag - uptrend continuation pattern
• Resistance level and profit target level of $8-9

PNC PNC Financial Services Group - Financials

• Stock may continue upwards following breaking above downward trend line
• Potential upside profit target and the resistance level of $115

Top 2 Sell Candidates

COG Cabot Oil & Gas Corp. - Energy

• Potential medium-term topping pattern along the resistance level of $22
• Downward correction play
• Negative divergence between the price and RSI indicator
• The support level of $20 - downside profit target price

EBAY eBay, Inc. - Consumer Discretionary

• Potential topping pattern
• Stock may retrace its recent advance - downward correction play
• Breakdown below the steep upward trend line
• The support level of $33-34 - downside profit target level

Conclusion

In our opinion, the following stock trades are justified from the risk/reward point of view between April 22 and April 28:

Long: SLB, EXPE, LH, COTY, PNC

Short: WMT, NDAQ, VZ, COG, EBAY

Thank you.

Paul Rejczak
Stock Trading Strategist
Sunshine Profits - Effective Investments through Diligence and Care

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Disclaimer

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.