The broad stock market has extended its short-term consolidation in the last five trading days (May 6 - May 12). 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 2,900 mark. Recently it has been fluctuating following the mentioned rally. There is no clear short-term direction.

The S&P 500 index has lost 0.45% since last Wednesday's open. In the same period of time our five long and five short stock picks have gained 1.78%. So stock picks were relatively stronger than the broad stock market. Our long stock picks have lost 0.60% and short stock picks have resulted in a gain of 4.16%. 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:

• May 12, 2020
  Long Picks (May 6 open - May 12 close % change): SLB (+5.17%), WYNN (-2.24%), MLM (-7.68%), MKC (+4.97%), GE (-3.22%)
  Short Picks (May 6 open - May 12 close % change): SYY (-3.33%), CAT (-4.81%), XEL (-7.15%), COG (-6.68%), AMZN (+1.18%)
  
  Average long result: -0.60%, average short result: +4.16%
  Total profit (average): +1.78%
• May 5, 2020
  Long Picks (Apr 29 open - May 5 close % change): MPC (+4.50%), GILD (-5.75%), LIN (-3.19%), GE (-7.19%), HIG (-13.29%)
  Short Picks (Apr 29 open - May 5 close % change): UPS (-3.53%), SPGI (-2.59%), SO (-6.06%), COG (-1.16%), AMGN (-1.06%)
  
  Average long result: -4.98%, average short result: +2.88%
  Total profit (average): -1.05%
• Apr 28, 2020
  Long Picks (Apr 22 open - Apr 28 close % change): SLB (+4.46%), EXPE (+14.94%), LH (+10.36%), COTY (-0.51%), PNC (+4.52%)
  Short Picks (Apr 22 open - Apr 28 close % change): WMT (-1.54%), NDAQ (+2.50%), VZ (+0.73%), COG (-3.79%), EBAY (+2.44%)
  
  Average long result: +5.17%, average short result: +0.18%
  Total profit (average): +2.68%

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, May 13 - Tuesday, May 19 period.

We will assume the following: the stocks will be bought or sold short on the opening of today's trading session (May 13) and sold or bought back on the closing of the next Tuesday's trading session (May 19).

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 2.91% from the closing price on April 9. The strongest sector was Energy XLE, as it gained 10.41%. The Technology XLK gained 9.63% and Communication Services XLC gained 9.23%.

On the other hand, the weakest sector was Real Estate XLRE, as it lost 11.18% in a month. The Financials XLF lost 8.90% and Utilities XLU lost 8.88%.

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 Technology, 1 x Communication Services
• sells: 1 x Real Estate, 1 x Financials, 1 x Utilities

Contrarian approach (betting against the recent trend):

• buys: 1 x Real Estate, 1 x Financials
• sells: 1 x Energy, 1 x Technology

Trend-following approach

Top 3 Buy Candidates

SLB Schlumberger Ltd. - Energy

• Stock still above its month-long upward trend line
• The resistance level of $19
• Initial upside profit target level of $22-24

CSCO Cisco Systems, Inc. - Technology

• Stock broke above the resistance level of $43
• Potential uptrend resuming following breaking above bull flag pattern
• Upside profit target level of $45

NWSA News Corp. - Communication Services

• The market broke above medium-term downward trend line
• The resistance level of $12 (upside profit target level)
• The support level of $10.00-10.25

Top 3 Sell Candidates

AVB Avalonbay Communities, Inc. - Real Estate

• Stock remains below month-long downward trend line
• Breakout below the support level of $155
• The next support level of $140 (downside profit target level)

C Citigroup, Inc. - Financials

• Stock broke below its bearish flag pattern - potential downtrend resuming
• The support level of $35-40 - downside profit target level

AEP American Elec Pwr Co., Inc. - Utilities

• Stock remains below month-long downward trend line
• The support level of $74 - downside profit target level

Contrarian approach

Top 2 Buy Candidates

CCI Crown Castle Intl Corp. - Real Estate

• Potential bullish flag pattern
• The stock may continue its uptrend and reach or break above previous highs
• The resistance level and profit target level of $167.5

CB Chubb Ltd. - Financials

• Possible attempt at reversing higher
• The price is above the falling wedge pattern
• Potential upside profit target and the resistance level of $110-115

Top 2 Sell Candidates

COP ConocoPhillips - Energy

• Potential topping pattern along the resistance level of $42.50-45.00
• The support level of $30 - downside profit target price

AAPL Apple, Inc. - Technology

• Potential medium-term topping pattern
• Stock may retrace its recent advance - downward correction play
• Possible breakdown below upward trend line
• The support level of $285 - downside profit target level

Conclusion

In our opinion, the following stock trades are justified from the risk/reward point of view between May 13 and May 19:

Long: SLB, CSCO, NWSA, CCI, CB

Short: AVB, C, AEP, COP, AAPL

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.