Stock Pick Update: June 10 - June 16, 2020

The broad stock market has accelerated its uptrend in the last five trading days (June 3 - June 9). More than two months ago on March 23, the S&P 500 index sold off to 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 index got back above 3,200 mark. However, the index remains 5.8% below the mentioned record high.

The S&P 500 index has gained 3.49% since last Wednesday's open. In the same period of time our five long and five short stock picks have gained 0.84%. Stock picks were relatively weaker than the broad stock market last week. Our long stock picks have gained 3.68%, so they have been relatively stronger than the S&P 500 index. However, short stock picks have resulted in a loss of 2.01%. The overall results remain relatively better than the S&P 500 index over last months.

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:

June 2, 2020
Long Picks (June 3 open - June 9 close % change): VMC (+5.25%), DISCK (+7.87%), HAS (+6.62%), HSY (-2.90%), MRK (+1.56%)
Short Picks (June 3 open - June 9 close % change): MNST (-3.00%), ABBV (+5.14%), EQIX (-0.07%), ECL (+5.14%), FB (+2.83%)

Average long result: +3.68%, average short result: -2.01%
Total profit (average): +0.84%
June 2, 2020
Long Picks (May 27 open - June 2 close % change): OXY (+0.34%), DISCK (-1.60%), HAS (-0.39%), PPL (+8.41%), SYY (+1.14%)
Short Picks (May 27 open - June 2 close % change): AEP (+6.10%), CAG (+4.84%), ABBV (+0.55%), COP (-0.32%), FB (+1.59%)

Average long result: +1.58%, average short result: -2.55%
Total profit (average): -0.49%
May 26, 2020
Long Picks (May 20 open - May 26 close % change): SLB (+5.32%), TWTR (+11.51%), CSCO (-0.47%), SPG (+1.13%), DTE (+1.06%)
Short Picks (May 20 open - May 26 close % change): AMT (+5.15%), SO (+0.87%), K (-0.34%), HES (+3.07%), NFLX (-8.69%)

Average long result: +3.71%, average short result: -0.01%
Total profit (average): +1.85%

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, June 10 - Tuesday, June 16 period.

We will assume the following: the stocks will be bought or sold short on the opening of today's trading session (June 10) and sold or bought back on the closing of the next Tuesday's trading session (June 16).

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 5.87% from the closing price on May 7. The strongest sector was Energy XLE , as it gained 21.63%. The Industrials XLI gained 20.78% and Financials XLF gained 19.94%.

On the other hand, the weakest sector was Health Care XLV, as it gained 3.98% in a month. The Consumer Staples XLP gained 6.56% and Technology XLK gained 9.60%.

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 Industrials, 1 x Financials
sells: 1 x Health Care, 1 x Consumer Staples, 1 x Technology

Contrarian approach (betting against the recent trend):

buys: 1 x Health Care, 1 x Consumer Staples
sells: 1 x Energy, 1 x Industrials

Trend-following approach

Top 3 Buy Candidates

SLB Schlumberger Ltd. - Energy

Stock trades within a consolidation following breaking higher
Potential short-term uptrend continuation/ further acceleration
The resistance level of $28 (upside profit target level)

IEX Idex Corp. - Industrials

Stock trades along its upward trend line
Upside profit target level of $170-175 (the resistance level)
The support level remains at $150-160

L Loews Corp. - Financials

The market trades along upward trend line
The resistance levels of $44 (upside profit target)
The support level remains at $26

Top 3 Sell Candidates

ABBV AbbVie Inc. - Health Care

Potential medium-term topping pattern
The resistance level is at $96-100
Downward correction play
The support level of $88-90 (short-term downside profit target level)

COST Costco Wholesale Corp. - Consumer Staples

Potential breakdown below upward trend line
Downward correction play
The support level of $295-300 - downside profit target level

ADBE Adobe Systems, Inc. - Technology

Potential medium-term topping pattern
Stock may break below upward trend line
The support level of $370 - initial downside profit target level

Contrarian approach

Top 2 Buy Candidates

BSX Boston Scientific Corp. - Health Care

The market remains above its upward trend line
Stock may resume the uptrend following breaking above an over month-long consolidation
The resistance level of $42 - upside profit target level

KR Kroger Co. - Consumer Staples