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 two Financials and one Materials stock this time.

In the last five trading days (January 6 – January 12) the broad stock market has extended its record-breaking run-up. The S&P 500 index has reached new record high of 3,826.69 on Friday following new stimulus package hopes.

The S&P 500 has gained 2.40% between January 6 open and January 12 close. In the same period of time our five long and five short stock picks have gained 1.59%. Stock picks were relatively weaker than the broad stock market's performance last week. However, our long stock picks have gained 3.35% outperforming the index. Short stock picks have resulted in a loss of 0.17%.

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 (January 6 open – January 12 close % change): ECL (+1.65%), CE (+3.80%), KMI (+7.87%), VLO (+1.45%), NVDA (+1.98%).
Short Picks (January 6 open – January 12 close % change): PLD (-1.43%), SPG (+1.70%), DUK (-1.13%), PEG (+1.97%), HON (-0.27%).

Average long result: +3.35%, average short result: -0.17% Total profit (average): +1.59%.

Stock Pick Update performance chart since Nov 18, 2020:

fxsoriginal

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, January 13 – Tuesday, January 19 period.

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

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 Financials, 2 x Materials, 1 x Consumer Discretionary.

  • sells: 2 x Real Estate, 2 x Communication Services, 1 x Consumer Staples.

Buy Candidates

AXP American Express Co. - Financials.

AXP

  • Stock remains above its medium- and short-term upward trend lines.

  • Possible breakout above the previous high.

  • The resistance level is at $124 and support level is at $113.

SPGI S&P Global Inc. – Financials.

SPGI

  • Possible upward reversal from the support level of $212-213.

  • The resistance level is at $325 – short-term upside profit target level.

SHW Sherwin Williams Co. – Materials

SHW

  • Stock broke above the short-term downward trend line – uptrend continuation play.

  • The support level is at $710 and resistance level is at $740-750.

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


Want free follow-ups to the above article and details not available to 99%+ investors? Sign up to our free newsletter today!

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' employees and 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, Przemyslaw Radomski, CFA 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. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA 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. Przemyslaw Radomski, CFA, 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.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD rises above 1.21 amid better market mood

EUR/USD has been extending its gains, recapturing 1.21 as the market mood improves. The German ZEW Economic Sentiment beat estimates with 61.8 points. Treasury Secretary nominee Janet Yellen's testimony is awaited.

EUR/USD News

GBP/USD clings to 1.36 ahead of Yellen's testimony

GBP/USD is edging above 1.36 as markets eagerly Treasury Secretary nominee Janet Yellen's testimony. The UK parliament is set to process the Brexit deal as Britain ramps up its vaccination campaign.

GBP/USD News

Gold recovers further from multi-week lows, climbs to $1845 region

Gold gained positive traction for the second consecutive session on Tuesday. A modest USD pullback was seen as a key factor that benefitted the metal. The risk-on mood, rallying US bond yields might cap gains for the commodity.

Gold news

Breaking: Ethereum explodes to new yearly high, validating upward price action

Ethereum has ascended to new yearly highs after breaking the recent peak achieved in January. The flagship altcoin is trading at $1,372 amid the push for gains eyeing $1,400. 

Read more

US Dollar Index: Downside pressure alleviated above 91.00

DXY met sellers in the 91.00 neighbourhood on Monday and now retreats to the 90.50 region on turnaround Tuesday.

US Dollar Index News

Forex Majors

Cryptocurrencies

Signatures