Weekly Trading Update #27 (Jul 1)
The only stocks you need to watch this week, hand-picked by my proprietary algorithm
Dear subscribers,
Welcome back to My Weekly Stock, where we blend in-depth market analysis with proven momentum-based trading strategies. My mission? Help you navigate the markets with unbiased, data-driven insights that you can act on.
As we head into a new week, it's time for my Weekly Trading Update! Stay tuned to learn more about how my trading strategies work and my performance.
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Let’s get started!
THIS WEEK’S SNAPSHOT
Momentum Outlook: The S&P 500 tried to break above the 5,500 level on Friday but couldn't hold onto the gains. However, the pullback has been mild and the index remains above key trend lines.
Weekly Momentum Pick: Walmart (WMT) is my stock pick for this week, a leading company within the Consumer Defensive sector, trading less than 1% from its 1-year high. Since 2019, my momentum picks have returned more than 500%.
Swing Trade Portfolio: 63% of my portfolio is invested across 14 positions. Alphabet (GOOG, +23%) and Nvidia (NVDA, +38%) are the best 2 performers. Since its inception in October 2023, my Swing Trade Portfolio has returned 27%.
Trading Week Reflection:
It was a disappointing week for the trading portfolio. Several factors contributed, including the late Friday sell-off in tech stocks, which form a significant portion of the portfolio. Additionally, Nike, which plummeted 20% on Friday following disastrous earnings, compounded the losses.
Experiencing substantial losses on one holding is an inevitable part of stock picking. That’s why diversification is so crucial. Double-digit sell-offs can happen, especially around earnings reports, and a too concentrated portfolio would make a recovery challenging. On the other hand, understanding trends in higher timeframes is helpful even when doing short-term trading. In my case, that helps me in effectively sizing my positions. For instance, stocks in a long-term downtrend, like Nike, often experience more failed breakouts due to overhead resistance. This is why I opted for smaller position sizes in Nike (and Tesla), balancing risk management with the need for exposure to substantial upside potential yet volatile nature.
WEEKLY MOMENTUM PICK
My Approach
I use a proprietary algorithm to collect momentum indicators for each company on my watchlist, such as performance over the last one and three months and the current price vs. their respective 52-week high and low. I then rank the stocks based on each indicator, assigning a score from highest to lowest, and the stock with the highest average score becomes my pick for the week.
From there, I developed a simple trading principle: I buy one stock on Monday at the market open and sell it by Friday's close. I focus on the 30 stocks from the Dow Jones (+ Alphabet). Because the strategy rewards winners, the algorithm usually selects the same stock for multiple weeks in a row.
My Performance
Since 2019, my stock picks have consistently generated strong returns, both in absolute terms and compared to the S&P 500 index. The cumulative return on my weekly momentum picks has been +504% since 2019 (when traded with stop-loss), outperforming the S&P 500 by 4x.
My stock pick was down 0.6% last week, bringing my 2024 performance to 19%.
My Momentum Pick for This Week
My stock pick for week #27 of 2024 is Walmart (WMT). The stock has risen 4% in the past month and 13% in the past quarter and is now trading less than 2% from its 52-week high. That makes WMT the stock with the best momentum profile on my watchlist.
I use a 2% stop-loss and a 6% profit target. Stop-losses are critical elements of any trading plan, particularly in periods of market volatility. I use stop-losses as price levels of interest to manage my positions, but I don’t set them up as automated orders. As a principle, I never sell on Mondays to give the trade a chance to work out.
Confidence Level: HIGH
Momentum Conditions: Strong | Algo Score: 86
The confidence level is a qualitative assessment based on my experience trading these stock picks. Best-performing picks typically involve 1) supportive broader market conditions and 2) an algo score below 94, meaning the stock has room to run further.
That’s it for the free part of my Weekly Trading Update.
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