EB Weekly Portfolio Report - Sunday, June 11, 2023
Upcoming Earnings Reports
According to Zacks.com, the following companies will be reporting earnings this week and each is a component of one of our portfolios:
Monday, June 12: None
Tuesday, June 13: None
Wednesday, June 14: None
Thursday, June 15: None
Friday, June 16: None
PLEASE NOTE: The above companies were provided using Zacks.com. We do hold our portfolio stocks through one earnings report, but every EarningsBeats.com member must make his/her own investing/trading decisions about holding stocks into earnings reports as it's the most volatile (risky) time to own a stock.
Portfolio Rules and Objectives
Here are the common traits and objectives of our portfolios:
- There are 10 leading stocks from up to 10 leading industries in each portfolio (at the time of selection). Generally, there will only be one stock per industry group, but there could be exceptions.
- They are typically held for an entire 90-day period, with no stops in place. We strive for consistency, transparency, and simplicity in our portfolios. EB.com members may hold these stocks for the entire 90 days, trade them, use stops, etc., but for purposes of our calculation, we will likely make no exceptions to our "buy and hold for three months" strategy.
- Every stock will generally be held through ONE earnings report
- The expectation is that relative winners will carry the portfolio to outperformance
- All portfolio stocks were announced on Thursday, May 18th, and were all entered into as of the close on Friday, May 19th for tracking purposes
- Primary objective is to outperform the benchmark S&P 500 over time; quarter-to-quarter performance can be extremely volatile, especially if significant rotation takes place intra-quarter
Here are several considerations for EB members:
- The Income Portfolio should have the least amount of volatility as it will typically be comprised of quality large cap stocks with solid dividends
- The Model and Aggressive Portfolios should be viewed similar to aggressive growth funds; they will typically have a lot of volatility and periodic drawdowns can be significant from time to time
- The Income portfolio stocks will all pay dividends, with the expected average dividend yield to be at least 1.0%
- Drawdowns (losses) should be much milder on the Income portfolio, with more volatility expected on the other two; please review inception-to-date charts below to gain an idea of the volatility associated with each
- I believe the larger drawdown on the Income portfolio at the beginning of the pandemic was an anomaly, occurring as many defensive, higher-yielding companies uncharacteristically underperformed during a market decline.
- Large drawdowns in the February through May 2021 and the November 2021 to February 2022 periods were due to the rapid rotation from growth stocks to value stocks; each quarter, our portfolios are based on themes and there is never a guarantee that our analysis and beliefs will be proven correct
- Consider owning or trading these stocks in whatever manner is most comfortable for you; while we will buy all 10 stocks in the manner identified above, feel free to trade certain stocks or wait for pullbacks if the stocks are overbought
- We have no idea what risk each member is willing or able to take. We are not registered investment advisors so be sure you understand the risk you take. Please consult your financial advisor.
- EarningsBeats.com shareholders/employees may own all or some of the portfolio stocks from time to time.
Weekly Snapshot
Here's a weekly recap:
- S&P 500: +0.39%
- Model Portfolio: +0.69%
- Aggressive Portfolio: +0.63%
- Income Portfolio: +0.54%
- Model ETF Portfolio: +0.16%
Weekly Summary
Benchmark S&P 500:
It was another pretty decent week for U.S. equities as the three breakout groups that I discussed in last week's report - small caps (IWM), transports ($TRAN), and consumer discretionary (XLY) - all managed to lead the S&P 500 to the upside.
IWM:
TRAN:
XLY:
Those are the three charts I provided last week and they've remained quite strong, helping to keep the recent market advance alive.
9 of 11 sectors rose last week, as only technology (XLK) and consumer staples (XLP) lost ground. Discretionary has been trouncing staples in the consumer space for the better part of 6 weeks now. Check this out:
This is a GREAT ratio to watch historically in order to determine the sustainability of any S&P 500 rally. I'd say right now that this ratio fully supports the current rally.
Model Portfolio:
The Model Portfolio edged up 0.69% last week, slightly outperforming the S&P 500. Here's the updated inception-to-date chart of the portfolio:
Here are how the Model Portfolio component stocks performed last week:
Aggressive Portfolio:
The Aggressive Portfolio jumped 0.63% last week, slightly outperforming the S&P 500. Here's the updated inception-to-date chart of the portfolio:
Here are how the Aggressive Portfolio component stocks performed last week:
Income Portfolio:
The Income Portfolio climbed 0.54% last week, slightly outperforming the S&P 500.
Here's the updated inception-to-date chart of the portfolio:
Here are how the Income Portfolio component stocks performed last week:
Model ETF Portfolio
Our Model ETF Portfolio gained 0.16% last week, slightly underperforming the S&P 500.
Here's the updated inception-to-date chart of the Model ETF Portfolio:
Here are how the Model ETF Portfolio components performed last week:
Model Trade Setups
I will provide Model Trade Setups each week in this Weekly Portfolio Report, which will simply be to outline possible trades based on key support, resistance, relative strength, and where these trades come from. For instance, my trading strategy for Strong AD ChartList (SADCL) stocks might be completely different than my trading strategy on Strong Earnings ChartList (SECL) stocks. Obviously, it would be different from a Short Squeeze ChartList (SSCL) trading candidate. I'll lay out the annotated chart and my reasoning for the (potential) trade. I may provide follow-up on some or all of these setups in the Daily Market Report (DMR). I'll also provide full disclosure, if I own any of the setups provided. Feel free to trade these Model Trade Setups based on the annotated charts provided, or according to your own trading strategy. Or ignore them. It's completely up to you. I am not a Registered Investment Advisor (nor is EarningsBeats.com). THESE TRADING CANDIDATES SHOULD NOT BE VIEWED AS INVESTMENT ADVICE.
I view EarningsBeats.com as a market research, market guidance, and market education platform. We do not attempt, in any fashion, to manage anyone's money. We have no idea the risk tolerance of each of our members, nor do we have any idea of your financial goals and objectives. It would be irresponsible for us to provide advice to any of our members. Therefore, please consult your own financial advisor before considering any buy/sell decisions. You are completely responsible for the financial decisions that you make.
Last Week's Setups
We've continued to hold one long-term swing trade - DraftKings (DKNG) - but after a failed breakout attempt with a negative divergence in play, I believe it's best to remove it at a fairly small loss and revisit this trade next week after options expire. Here are the latest charts for each:
DKNG:
DKNG remains a leader in the gambling industry ($DJUSCA), but the short-term is dicey due to options expiration, last week's failed breakout attempt, and the negative divergence. Let's close out for now and revisit next week.
Entry: 25.93 (5/22/23)
Exit: 24.94 (6/9/23)
BKNG (Model Portfolio):
BKNG still looks solid, holding key price support. However, the overbought market conditions heading into options expiration week make current trades highly vulnerable. We'd rather be back to cash for now and a bit more cautious.
Entry: 2591.13 (5/26/23)
Exit: 2606.13 (6/9/23)
TPR (Aggressive Portfolio):
TPR appears to be on track to move higher to test overhead price resistance at 44.00. However, for the reasons mentioned earlier, we want to be safer and remove the trade with a profit.
Entry: 41.40 (5/26/23)
Exit: 42.69 (6/9/23)
AMZN (Aggressive Portfolio):
AMZN doesn't look bad technically, but its recent breakout suggests possible downside to approximately 118.50. Throw in the 20-day EMA, which is just about that level, and it appears there could be downside here simply based on technical conditions. But adding in options expiration really turns up the risk, so we're taking profits.
Entry: 120.11 (5/26/23)
Exit: 123.43 (6/9/23)
SKX (Aggressive Portfolio):
SKX has been solid for us, but overhead price resistance has been tested after a strong rally off the 50-day SMA test. We're taking our money now and we could revisit again after options expiry.
Entry: 51.07 (5/26/23)
Exit: 53.80 (6/9/23)
WING (Income Portfolio):
WING definitely has not worked out as planned. Earlier this week, it looked as if WING would bounce exactly where it needed to - off of the 50-day SMA. That failed later in the week, though, and it's time to take our loss here.
Entry: 200.77 (5/26/23)
Exit: 188.87 (6/9/23)
CMCSA:
We saw a bounce last week on CMCSA, as we expected. I believe there's more upside and I doubt that CMCSA would be affected much by options expiration, but we'll be consistent, take profits and possibly revisit this one next week.
Entry: 39.19 (6/2/23)
Exit: 40.23 (6/9/23)
This Week's Setups
Every week, I will provide setups among our Portfolio stocks and our ChartList stocks. My preference is to trade Portfolio stocks, when appropriate. These stocks are in our portfolios for a reason - they're generally leaders within leading or improving industries.
We exited all 6 positions from last week, taking advantage of strength in most of those trades last week. We're going to pass on trade setups right now, given the uncertainty over options expiration, the May CPI report, and the Fed policy statement.
The Week Ahead
Ready for this? It's Opposite George week as June monthly options will expire on Friday of this week. On Tuesday morning, we'll also receive the latest CPI news as the May CPI will be released. The Fed meets on Tuesday and Wednesday, with its latest policy statement due out at 2:00pm ET on Wednesday. On our Monthly Max Pain report, we've calculated that there's $7.2 billion of net in-the-money call premium on the SPY and QQQ - only two ETFs!!! There's another $8.9 billion of net in-the-money call premium on NVDA, TSLA, META, and AAPL. That's over $16 billion in total on 4 stocks and 2 ETFs. I don't believe I've ever seen anything like it.
Please keep in mind that it doesn't mean that market makers will lose money if stock prices move higher in the week ahead. But market makers will have a HUGE opportunity to make a FORTUNE if prices were to retreat. The fact that we have overbought conditions, a failed breakout on the S&P 500 from Friday, a key CPI report on Tuesday, and the latest Fed meeting and policy statement, there's the potential for massive fireworks this week - just a few weeks before the July 4th holiday.
I believe it makes sense to lower exposure this week. I can definitely argue the case that leveraging on the long side is the equivalent of financial suicide, despite the possibility that prices keep rising. Remember, there are few analysts as bullish as I am. This isn't about the long-term. I absolutely believe we're going higher in time and we're not as far from an all-time high as many might think. Rather, this is a MAJOR short-term warning. If we have a rough week ahead - and the QQQ suggests max pain is situated nearly 10% below Friday's close - there could be some EXCELLENT opportunities on the long side as we begin to approach Q2 earnings season. Historically, late June through the middle of July tends to be a very bullish period.
And if you're wondering, shorting stocks is certainly a possibility for those with high risk tolerance. Just please don't lose sight of the fact that bull markets can confound EVERYONE - even the bulls themselves.
If prices do drop, however, the selling could escalate quickly.
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."