At twopercentgoal.com we have been bearish on the market recently. This past week (Jan 26-30) was a successful week for shorting stocks. Of the recommended picks for shorting stocks this week, 8 out of 11 made money while 3 out of 11 lost. The number of winners vs losers should not matter, because it is the net gain in profits that tell the true story. The bottom line is this, our shorts had a net gain of 15.13% and that number is still climbing because one pick has met its 2% goal and has not been closed out yet. If you had bought on 3x margin, you would have seen a profit of 45.39%.
Here is a list of the winners and losers, the dates they were held, and the net gain or loss:
WINNERS LOSERS
Builders First (BLDR) Jan 26-28 3.21% Church & Dwight (CHO) Jan 29-30 (4.9%)
Dow Holdings (DOW) Jan 28-30 2% Clorox (CLX) Jan 29 (3%)
Darden Restaurant (DRI) Jan 22-28 3.57% Synopsis Inc (SNPS) Jan 26-29 ( 3%)
Extra Space Store (EXR) Jan 23 – 28 2.58%
Public Storage Inc (PSA) Jan 26-29 2%
Molson-Coors (TAP) Jan 27-28 2%
Whirlpool (WHR) Jan 27-30 8.67%
LyondelBassel (LYB) Jan 27- ? 2% Minimum
While that number sounds too good to be true, it is. That number only works if you have 100% of your portfolio on each pick and the picks are made consecutively and not concurrently. In reality, you would diversify. You should never have more than 10% of your portfolio on one stock and I go even lower than that at 5% to mitigate risk. Assuming a 5% diversity factor, you would see a return of 2.27% for the week. If you are giving this a big yawn, this is exactly what we strive for, because if you did this each week, that would be an annual return of 118%.
We went short because on a macro level, the Dow’s Relative Strength Index (RSI) was trending down, its MACD’s black line intersected negatively, and its stochastic oscillator has fallen from overbought territory, penetrated the 80-line threshold and continues to go down. The trend is your friend. Since the market was showing bearish signs, we looked for companies that were bearish too. All our picks listed above met the criteria for shorting. All our picks had their respective RSI come from overbought territory; they all had their 50-day average below their 200-day average; they all had their respective MACD turning direction and their on-balance volume was trending down. Finally, their respective stochastic oscillators fell from overbought territory and penetrate the 80-threshold line. The results speak for themselves.
To see how all the charts are used, watch this YouTube video:
Go to twopercentgoal.com and sign up for the daily email. It is free for the first 30 days and then $49/mo thereafter. It will show stocks poised for a 2% gain whether going long or short. Good luck with your investments.
Al