Commodity prices continued to slip last week, the US dollar gained and stocks ended modestly higher. So far earnings have continued to beat expectations (albeit off a low level) but this is yet to translate into solid gains for the market. Overall, our picks did relatively well last week with healthy profits for BIIB and NSR.
This week will be an important one with regard to economic data with Friday’s non-farm payrolls likely to take centre stage. There will also be data for personal income and outlays.
Investors will be interested to see whether the weakness in commodities is reflected in July’s key readings or whether the sell-off is overdone.
One of the main concerns for investors at this point is the tight trading range and choppy nature of the market. This has been a feature of 2015 so far and has made for difficult trading conditions. As well, investors are fully aware that the S&P 500 has now gone four years without a 10% correction in prices. This is illustrated in the below chart from Advisor Perspectives:
Here are this week’s picks:
Apple Inc. $AAPL
The short-term reversal strategy is a rotational trading system that looks to hold under performing, highly liquid stocks from the S&P 100 Index. This week’s pick goes to Apple Inc., with shares down around 4% on the month.
Looking at the chart, there is strong support at $120 per share and there is every chance that the stock will rebound from this area. Apple is still the world’s number one brand and plenty of investors will be eager to pick up shares on weakness.
Marwood Value Model
Goodyear Tire & Rubber Co. $GT
The Marwood Value Model is a value investing system that looks for stocks trading at significant discount to their intrinsic value. As well, Marwood Value stocks must have enough momentum to catalyse further upward gains.
This week’s value pick goes to a company that has been around since 1839. Goodyear Tire & Rubber Co. trades at just 3 times earnings and 8 times forward earnings and has a PEG ratio of 0.28. The stock is also in a strong upward trend and could revisit the intraday high that it made last week.
Buffalo Wild Wings Inc. $BWLD
Restaurant chain Buffalo Wild Wings Inc. gapped higher last week and is up over 20% on the month after beating earnings expectations. However, the stock closed the week with an uncertain doji candlestick and now trades at over 40 times earnings.
The RSI (14) indicator is now overbought at over 80 and the stock has a lot of bearish sentiment on StockTwits. Traders will be looking to take profits this week and that could see shares drop over the short-term horizon.