EB Weekly Portfolio Report - Sunday, July 30, 2023

Tom Bowley - July 30, 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, July 31: RMBS

Tuesday, August 1: AMD, EXAS, UBER, ZBH, MAR

Wednesday, August 2: WING

Thursday, August 3: AAPL, AMZN, BKNG, SYK

Friday, August 4: 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: +1.01%
Model Portfolio: +0.61%
Aggressive Portfolio: +3.34%
Income Portfolio: +1.09%
Model ETF Portfolio: +1.32%

Weekly Summary

Benchmark S&P 500:

The S&P 500 ($SPX, +1.01%) gained ground for the 9th time in the past 11 weeks, this time led by a very strong communication services group (XLC, +4.96%). It was strength in internet stocks ($DJUSNS, +9.55%) that powered the XLC to its highest finish in 15 months. The XLC was weak on both an absolute and relative basis in 2022, but that's clearly changed:

The XLC is one of three very aggressive sectors (XLK and XLY are the other two) that I like to see lead the S&P 500 to the upside. In addition to the obvious absolute strength, the bottom panel is perhaps the more critical part of this chart. As long as this line keeps rising, the stock market should remain in great shape.

Model Portfolio:

The Model Portfolio climbed 0.61% last week, underperforming 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 surged 3.34% last week, easily 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 rose 1.09% 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 1.32% last week, outperforming 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.

Recent Setups

Here is an update on setups provided two weeks ago:

CHD:

CHD didn't exactly burst to the upside, but it did manage to hang onto its price support zone. A close below 96 would be bothersome, but I expect to see strength from the current level.

Update: CHD continues to hold price support at 96, but there's been no significant rotation into defensive sectors and that's not helping stocks like CHD.

LLY:

LLY bounced nearly perfectly off of its 50-day SMA, following the negative divergence that had printed as we headed into July. A breakout above 470 would be bullish.

Update: LLY bounced nicely close to overhead price resistance at 470. It failed there, however, and is now hovering near its key 20-day EMA and 50-day SMA. 470 remains the target as its consolidation carries on.

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.

The bearish historical period from July 17th through July 24th is now firmly behind us. Positive money flows around the first of the month could help to generate short-term profits, so I'm slightly in the bullish camp at this point.

Here are two setups where I like the reward to risk this week and both are from our portfolios:

ISRG:

I've discussed recently that ISRG has solid support near 320. Last week's selling brought us down perfectly to that level. I like entry here at the current price and again at 320. I'd keep a closing stop below 315 and look for a price target of 350-360 to challenge the recent high.

SYK:

I like entry on SYK at the current price as gap support is being tested. A conservative approach would be a second entry near 270 with a closing stop beneath 269. Ultimately, my target here would be back at the recent price high near 305.

The Week Ahead

There are going to be two BIG earnings reports this week - Apple (AAPL) and Amazon.com (AMZN). These two behemoths don't report until Thursday after the bell, so most of the week will trade off of other earnings reports, economic reports, and technical conditions. We can't rule out a short-term selloff, because negative divergences remain in play. But moving to the end of July and beginning of August plays a bit more into the hands of the bulls. Here are the upcoming historical returns for the S&P 500 over the next week:

July 31 (Monday): +14.21%
August 1 (Tuesday): -10.27%
August 2 (Wednesday): +26.28%
August 3 (Thursday): +23.13%
August 4 (Friday): -61.96%

The latter part of the week doesn't look great from a historical perspective, but the first several days do favor long trades. I could see a short-term rally heading into the AAPL and AMZN earnings, followed by a selloff afterwards. That would follow the seasonal pattern.

Internet ($DJUSNS) has had a big run, but this rally seems to be getting a bit long in the tooth. Don't be surprised if money rotates away from this group and finds its way back into software ($DJUSSW) and automobiles ($DJUSAU), two groups that have struggled the past 1-2 weeks.

Happy trading!

Tom Bowley, Chief Market Strategist

EarningsBeats.com

"Better timing. Better trades."