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Stock pick update: August 12 - August 18, 2020

Commentaries & Views

Header: Which stocks could magnify S&P 500’s gains in case it rallies? Take a look at a part of our Stock Pick Update. We have included Industrials, Financials and Energy stocks this time.

The broad stock market has extended its medium-term uptrend in the last five trading days (August 5 – August 11). The S&P 500 index got closer to its February 19 record high of 3,393.52 on Tuesday, August 11 as the daily high reached 3,381.01. But the index reversed lower and closed 0.8% below Monday’s closing price yesterday.

More than four months ago on March 23, the market 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 erased more than a third of the broad stock market value. Since then stocks rallied 54.3%.

The S&P 500 index has gained just 0.49% between August 5 and August 11. In the same period of time our five long and five short stock picks have gained 1.62%. So stock picks were relatively stronger than the broad stock market. Our long stock picks have gained 1.65% and short stock picks have resulted in a gain of 1.59%.

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:

  • August 11, 2020

    Long Picks (August 5 open – August 11 close % change): V (+2.18%), WBA (+2.45%), ECL (+3.13%), XOM (+1.86%), PSA (-1.38%)

    Short Picks (August 5 open – August 11 close % change): COP (+3.14%), CCI (-2.75%), SPGI (-0.95%), PYPL (-5.01%), K (-2.35%)

    Average long result: +1.65%, average short result: +1.59%

    Total profit (average): +1.62%

  • August 4, 2020

    Long Picks (July 29 open – August 4 close % change): IFF (-2.27%), WBA (+0.24%), ED (-0.50%), XOM (-0.55%), WU (+7.13%)

    Short Picks (July 29 open – August 4 close % change): HES (+1.34%), XLNX (+2.30%), SPGI (-0.71%), APD (-3.33%), KO (-3.01%)

    Average long result: +0.81%, average short result: +0.68%

    Total profit (average): +0.75%

  • 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%

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, August 12 – Tuesday, August 18 period.

We will assume the following: the stocks will be bought or sold short on the opening of today’s trading session (August 12) and sold or bought back on the closing of the next Tuesday’s trading session (August 18).

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

Contrarian approach (betting against the recent trend):

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

Trend-following approach

Top 3 Buy Candidates

BA Boeing Co. - Industrials

  • Stock broke above two-month-long downward trend line
  • Potential medium-term uptrend continuation
  • The resistance level of $200-240

SCHW Charles Schwab Corp. – Financials

  • Potential short-term uptrend continuation after breaking above downward trend line
  • The resistance level of $36-38 (short-term upside profit target)
  • The support level is at $33

CXO Concho Resources Inc. - Energy

  • Stock remains above the previously broken downward trend line
  • The resistance level and an initial upside profit target level is at $60

Summing up, the above trend-following long stock picks are just a part of our whole Stock Pick Update. The Industrials, Financials 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.

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.

Thank you.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.