Sunshine Stock Picks of the Week

Which stocks could magnify S&P 500’s gains in case it rallies?

Author: Sunshine Profits   

The broad stock market remained within a short-term consolidation in the last five trading days (July 22 – July 28). The S&P 500 index has retraced some of its recent advances after getting closer to the 3,300 mark. More than four months ago on March 23, the market sold off to a new medium-term low of 2,191.86. It was a stunning 35.4% below February 19 record high of 3,393.52. The coronavirus and economic slowdown fears erased more than a third of the broad stock market value. But the index has rallied back closer to record high again.

 The S&P 500 index has lost 1.12% between July 22 and July 28. In the same period of time, our five long and five short stock picks have lost 2.83%. Stock picks were relatively weaker than the broad stock market. Our long stock picks have lost 4.59% following a large INTC stock sell-off and short stock picks have resulted in a loss of 1.07%.

 Could we have avoided such loss? Our 10-stock (5 long and 5 short) portfolio's weekly decline has been relatively large in the last five trading days. However, a 20% loss in one stock accounts for "only" 2% loss of 10-stock portfolio. 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 in 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.

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Below we include statistics and the details of our three recent updates:


·         July 28, 2020
Long Picks (July 22 open – July 28 close % change): MLM (-5.87%), MCD (+1.57%), INTC (-19.84%), XOM (-1.36%), IRM (+2.58%)
Short Picks (July 22 open – July 28 close % change): COG (-0.38%), WY (+6.86%), SPGI (-1.77%), APD (-0.40%), HD (+1.02%)

Average long result: -4.59%, average short result: -1.07%
Total profit (average): -2.83%

 

·         July 21, 2020
Long Picks (July 15 open – July 21 close % change): DOW (-1.40%), INTC (+2.83%), MCD (-0.47%), XOM (-0.84%), HST (-1.54%)
Short Picks (July 15 open – July 21 close % change): COG (+4.57%), VNO (-5.52%), AON (+2.30%), LIN (+1.36%), AAPL (-2.01%)

Average long result: -0.28%, average short result: -0.14%
Total profit (average): -0.21%

 

·         July 7, 2020
Long Picks (July 1 open – July 7 close % change): INTC (-2.67%), F (+0.33%), PPG (+2.17%), DTE (-0.35%), AIG (-5.93%)
Short Picks (July 1 open – July 7 close % change): XEL (+2.00%), BLK (+0.91%), EOG (-5.72%), MSFT (+2.52%), EBAY (+8.14%)

Average long result: -1.29%, average short result: -1.57%
Total profit (average): -1.43%

 

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 Wednesday, July 29 – Tuesday, August 4 period.

We will assume the following: the stocks will be bought or sold short on the opening of today's trading session (July 28) and sold or bought back on the closing of the next Tuesday's trading session (August 4).

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 investment advice) for this week, we will focus solely on the technicals. The latter is simply more useful in the 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.

The stock market sector analysis is available to our subscribers only.

 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 the trend-following approach, and top 2 long and top 2 short candidates using a contrarian approach:

 

Trend-following approach:

·         buys: 1 x Materials, 1 x Consumer Staples, 1 x Utilities

·         sells: 1 x Energy, 1 x Technology, 1 x Financials

 

Contrarian approach (betting against the recent trend):

·         buys: 1 x Energy, 1 x Technology

·         sells: 1 x Materials, 1 x Consumer Staples

 

Trend-following approach

Top 3 Buy Candidates

 

IFF Intl Flavors & Fragrances - Materials

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·         Stock remains above the upward trend line

·         Potential medium-term uptrend continuation

·         The resistance level of $132.5-137.5

 

WBA Walgreens Boots Alliance, Inc. – Consumer Staples

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·         Potential short-term uptrend continuation pattern – bull flag

·         The resistance level of $44 (short-term upside profit target)

·         The support level remains at $38-39

 

ED Consolidated Edison, Inc. - Utilities

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·         Stock broke above the medium-term downward trend line

·         The resistance level and upside profit target level at $82-84

·         The support level is at $70

 

Summing up, the above trend-following long stock picks are just a part of our whole Stock Pick Update. The Materials, Consumer Staples, and Utilities 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.

Contributed by:

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 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 a 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.

CapitalWatch Disclaimer

The opinions expressed in this article do not reflect the position of CapitalWatch or its journalists. Capitalwatch has no business relationship with any company whose stock is mentioned in this article. Information provided is for educational purposes only and does not constitute financial, legal, or investment advice


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