In the last five trading days (December 16 – December 22) the broad stock market has extended its short-term consolidation following record-breaking run-up. The S&P 500 index reached new record high of 3,726.70 on Friday, before retracing most of last week’s advances.
The S&P 500 has lost 0.24% between December 16 open and December 22 close. In the same period of time our five long and five short stock picks have lost 0.04%. Stock picks were relatively slightly stronger than the broad stock market last week. Our long stock picks have lost 3.94%, however short stock picks have resulted in a gain of 3.86%. Short stock picks’ performance outpaced the benchmark return on the downside, but the whole portfolio followed broad stock market very closely.
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.
Our last week’s portfolio result:
Long Picks (December 16 open – December 22 close % change): XOM (-5.74%), COP (-8.91%), WFC (-2.29%), BK (+0.02%), FB (-2.79%)
Short Picks (December 16 open – December 22 close % change): DUK (-3.10%), EVRG (-4.03%), SPG (-5.23%), CBRE (-5.37%), KO (-1.57%)
Average long result: -3.94%, average short result: +3.86%
Total profit (average): -0.24%
Stock Pick Update performance chart since Nov 18, 2020:
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, December 23 – Tuesday, December 29 period.
We will assume the following: the stocks will be bought or sold short on the opening of today’s trading session (December 23) and sold or bought back on the closing of the next Tuesday’s trading session (December 29).
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 .
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 5 long and 5 short candidates using trend-following approach:
- buys: 2 x Technology, 2 x Energy, 1 x Financials
- sells: 2 x Utilities, 2 x Real Estate, 1 x Consumer Staples
CRM Salesforce.com, Inc. — Technology
- Stock remains above its short-term upward trend line
- Uptrend continuation play
- The support level is at $220 and resistance level is at $240-250 (short-term target profit level)
NVDA NVIDIA Corp. — Technology
- Stock trades above medium-term upward trend line
- Possible breakout above short-term consolidation
- The support level is at $490-500 and resistance level is at $550
PSX Phillips 66 – Energy
- Possible short-term bull flag pattern – uptrend continuation play
- The support level is at $60 and resistance level is at $70
Summing up , the above trend-following long stock picks are just a part of our whole Stock Pick Update. The Technology and Energy 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.
DISCLOSURE: The views and opinions expressed in this article are those of the contributor, and do not represent the views of Advisorpedia. Readers should not consider statements made by the contributor as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please click here.