Weekly Trading Update #42 (Oct 14)

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.

Remember, you can upgrade your subscription to unlock access to all my trading and investing portfolios!

Let’s get started!

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THIS WEEK’S SNAPSHOT

• Momentum Conditions: The S&P 500 shook off hotter-than-expected inflation reports and surged past 5,800. The index is trading week above its 21-day EMA.

• Weekly Momentum Pick: Caterpillar ($CAT) is my stock pick for this week, a leading company within the Industrial sector, trading less than 1% from its 1-year high. Since 2019, my momentum picks have returned more than 500%.

• Swing Trade Portfolio: 61% of my portfolio is invested across 17 positions. Meta Platforms ($META, +16%) and Home Depot ($HD, +14%) are the best 2 performers. Since its inception in October 2023, my Swing Trade Portfolio has returned 29%.

Trading Week Reflection:

It was another week where, despite the volatility, patience paid off. While my momentum picks took a hit as my stop-loss got triggered fast, my Swing Trade portfolio benefited from my more patient approach. A mix of diversification and aggressive profit-taking has left me better positioned to wait for clearer reversal signals. That paid off as the market rallied in the second half of the week to reach another all-time high.

Looking ahead, I'll be adding more exposure to financials and healthcare. I am holding onto most of my current positions; however, I'll continue to seek opportunities where profit-taking makes sense. As Tesla demonstrated, it's rarely wrong to lock in gains, especially as we approach significant catalysts. That remains true as the new earnings season is about to kick off and will likely bring heightened volatility.

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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 +557% since 2019 (when traded with stop-loss), outperforming the S&P 500 by 4x.

My stock pick was up 1.4% last week (down 2% with stop-loss), bringing my 2024 performance to 30%.

My Momentum Pick for This Week

My stock pick for week #41 of 2024 is Caterpillar ($CAT). The stock has risen 18% in the past month and 16% in the past quarter and is now trading less than 1% from its 52-week high. That makes $CAT 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: 94

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.

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That’s it for the free part of my Weekly Trading Update.

I hope you enjoyed my analysis so far. If you’d like to see more in-depth insights, subscribe to the paid version and get complete access to my short and long-term portfolios!

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