My stock pick for week #46 of 2023 (Nov 13-17)
The stocks you need to watch this week, hand-picked by my proprietary algorithm
Hello fellow investors!
It's Monday, and that means it's time for my weekly stock pick!
My stock selections are derived from my proprietary algorithm that analyzes various technical and momentum indicators to identify the companies the most likely to outperform short-term. This strategy has a proven track record of success, with a return of more than 300% since 2019.
This week, my algorithm has identified Microsoft (MSFT) as a top pick, a leading company within the Technology sector, trading less than 1% from its 52-week high.
I hope you enjoy this week's edition and find it helpful. If you like what you see, please share it with your network on social media and, if you haven't already, subscribe to our email updates.
Stay tuned to learn more about how my algorithm works and my performance. And, as always, happy investing!
METHODOLOGY
My trading methodology is based on a momentum strategy validated through extensive research and back-testing. I use a proprietary algorithm that runs over the weekend to identify stocks showing strong momentum and likely to continue outperforming.
The algorithm collects momentum indicators for each stock in my watchlist, including performance over the last 1 and 3 months and the current price compared to the 52-week high and low. I then rank the stocks based on each indicator, assigning a score from highest to lowest. For example, if I have 30 stocks on my watchlist, the stock with the best 1-month return would receive a score of 30, while the second-best would receive a score of 29, and so on. I then calculate the average score of all the indicators using a proprietary weighting system, 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). It is common for the same stock to be selected by the algorithm for several weeks in a row, as the strategy favors winners, and I have a relatively small stock universe.
PERFORMANCE
I track my performance by looking at the difference between the stock price at the start of the week (Monday's opening) and the end of the week (Friday's closing). In addition, I use a -2% stop-loss and 6% profit target. Stop-losses are critical elements of any trading plan.
I then compound the weekly results to determine my cumulative and yearly 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 stock picks has been up to 387% since 2019 (when traded with stop-loss), outperforming the S&P 500 by a factor of 5.
Last week, my stock pick was up by 4.9%, bringing my performance in 2023 to 6% when trading with a -2% stop-loss and 6% profit target.
MARKET OUTLOOK
We smoothly consolidated last week's blockbuster gains, marking another victorious week for the bulls, and the momentum is currently skewing upwards. This rally from the October lows seems fueled mainly by hopes that the Fed's rate hikes might be nearing an end. And in this light, the upcoming CPI data next week is more pivotal than ever.
Technically speaking, the S&P 500 is at a fascinating juncture, having reclaimed the 4,400 level. Ideally, I'd prefer the index to maintain above this threshold. However, note that with no significant support until the 4,180-4,110 zone, we could be in for a steep descent if we fail to sustain this gain. Market breadth is another indicator to keep an eye on and broader stock participation, beyond mega-cap stocks, would be a positive sign.
MY STOCK PICK
My stock pick for week #46 of 2023 is Microsoft (MSFT). The stock is up 12% in the past month, 14% in the past quarter, and trading less than 1% from its 52-week high. That makes MSFT the stock with the best momentum profile in my watchlist.
I trade all my stock picks and typically use a stop-loss of -2% and a profit target of 6%. Stop-loss is a critical element of any trading plan and especially important in volatile periods.
CONCLUSION
To wrap up, my stock pick for this week is Microsoft (MSFT). While it's impossible to predict market movements with certainty, Microsoft has the best momentum profile within my watchlist, and I encourage my readers to research the stock further.
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As always, happy investing, and I look forward to sharing my next pick with you next Monday!
My Weekly Stock
DISCLAIMER
Please be aware that I currently do not have a position in the stocks mentioned in this article, but I may initiate a position within the next 24 hours. This disclosure is made for transparency purposes and should not be taken as a recommendation to buy or sell any securities.
The information provided in this newsletter is for informational purposes only and should not be taken as financial advice. Any investments or decisions made based on the information provided in this newsletter are the reader's sole responsibility. We recommend that readers conduct their own research and consult a qualified financial professional before making investment decisions. The author does not assume any responsibility for any losses or damages arising from using the information provided in this newsletter.
So, you think MSFT has further upside from here? I am not a technicals expert, but looking at the chart, I thought the MACD and RSI was extended, so thought it would be due for at least a minor pullback. But once again, my knowledge in this space is limited. Let me know if and why my thinking is wrong?
Thank you so much for the great question! In general, I believe MSFT do hve further upside. Now as you pointed out, we may first consolidate a bit, especially after last 2 weeks strong gains.
Just a note on my algo. These stock picks are based on quantitative ranking. I use different momentum indicators and rank the stock within the Dow Jones. So my algo is telling me MSFT has the best momentum profile but it is a relative ranking system, not a guarantee for gains nor that it is the best set up.
Ultimately, these are short term trades, and it is very hard to predict market movements. But my research hs shown that stocks in positive momentum tend to continue to outperform. Ultimately, it is all about probability, risk-reward and have sound risk management in place. But I am definitivey not always right and there is room to improve the algo!