In the last five trading days (November 4 – November 10) the broad stock market has extended its over eleven-year long bull market. On Monday, November 9 the S&P 500 index reached new record high of 3,645.99 following news about Pfizer’s coronavirus vaccine and the U.S. Presidential Election outcome.
The S&P 500 index has gained 4.08% between November 4 and November 10. In the same period of time our five long and five short stock picks have lost 2.33%. So stock picks were relatively weaker than the broad stock market. Our long stock picks have gained 1.39% but short stock picks have resulted in a loss of 6.05%.
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:
- November 10, 2020
Long Picks (November 4 open – November 10 close % change): PEG (+2.17%), IFF (+4.81%), LMT (+0.06%), CSCO (+4.56%), PHM (-4.68%)
Short Picks (November 4 open – November 10 close % change): ADI (+10.12%), APTV (+7.60%), CBRE (+9.51%), WEC (+1.03%), FMC (+1.98%)
Average long result: +1.39%, average short result: -6.05%
Total profit (average): -2.33%
- November 3, 2020
Long Picks (October 28 open – November 3 close % change): D (+2.09%), FB (-4.84%), WYNN (+5.46%), BKR (+15.24%), ARE (+1.53%)
Short Picks (October 28 open – November 3 close % change): PXD (+1.27%), DRE (+8.66%), ITW (+7.09%), CMS (+0.72%), CMCSA (-0.63%)
Average long result: +3.90%, average short result: -3.42%
Total profit (average): +0.24%
- October 27, 2020
Long Picks (October 21 open – October 27 close % change): PPL (+1.96%), WDC (-3.40%), WYNN (-0.25%), XOM (-2.06%), LIN (-3.02%)
Short Picks (October 21 open – October 27 close % change): WMB (-1.12%), SHW (-0.23%), TROW (-2.61%), WEC (+1.63%), NVDA (-1.68%)
Average long result: -1.35%, average short result: +0.80%
Total profit (average): -0.27%
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, November 11 – Tuesday, November 17 period.
We will assume the following: the stocks will be bought or sold short on the opening of today’s trading session (November 11) and sold or bought back on the closing of the next Tuesday’s trading session (November 17).
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 2.86% from the closing price on October 8. The strongest sector was Energy XLE, as it gained 9.08%. The Financials XLF gained 7.72% and Materials XLB gained 6.57%.
On the other hand, the weakest sector was Real Estate XLRE, as it lost 0.73% in a month. The Consumer Discretionary XLY lost 0.06% and Technology XLK gained just 0.08%.
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 Energy, 1 x Financials, 1 x Materials
- sells: 1 x Real Estate, 1 x Consumer Discretionary, 1 x Technology
Contrarian approach (betting against the recent trend):
- buys: 1 x Real Estate, 1 x Consumer Discretionary
- sells: 1 x Energy, 1 x Financials
Top 3 Buy Candidates
KMI Kinder Morgan Inc. - Energy
- Stock broke above medium-term downward trend line - uptrend continuation play
- The resistance level of $13.25 and support level of $11.75
WFC Wells Fargo & Co. – Financials
- Short-term uptrend continuation play
- The resistance level of $25.00-25.50
- The support level remains at $22.50
IFF Intl Flavors & Fragrances – Materials
- Stock broke above downward trend line, possible uptrend continuation
- The resistance level is at $114
- The support level is at $104
Top 3 Sell Candidates
SPG Simon Property Group, Inc. – Real Estate
- Stock bounced off a resistance level at $85
- Downward correction play
- The support level is at $72 - short-term downside profit target level
YUM Yum! Brands Inc. – Consumer Discretionary
- Possible medium-term downward reversal pattern
- The resistance level is at $106
- The nearest important support level is at $100 and a downside profit target level is at $92
ADP Automatic Data Processing, Inc. – Technology
- Possible medium-term topping pattern
- The resistance level is at $175
- The support level is at $162.50, among others
Top 2 Buy Candidates
DLR Digital Realty Trust, Inc. – Real Estate
- Possible upward reversal following the recent decline below September local lows
- The resistance level is at $139 and support level is at $132
EBAY eBay, Inc. – Consumer Discretionary
- Stock may bounce within a medium-term downward trading channel
- The support level is at $42-45
- The resistance level is at $51
Top 2 Sell Candidates
SLB Schlumberger Ltd. - Energy
- Possible short-term topping pattern
- The support level is at $17 – short-term downside profit target level
BLK Blackrock, Inc. - Financials
- Stock bounced off the resistance level of $690
- The support level is at $630 – short-term downside profit target level
In our opinion, the following stock trades are justified from the risk/reward point of view between November 11 and November 17:
Long: KMI, WFC, IFF, DLR, EBAY
Short: SPG, YUM, ADP, SLB, BLK
Stock Trading Strategist
Sunshine Profits - Effective Investments through Diligence and Care