Almanac Investor Stock Trades: Five Select Seasonal Shorts By: Christopher Mistal | April 21, 2016 | Email | Print

As of yesterday’s close DJIA was up 3.9% year-to-date; S&P 500 was up 2.9%, NASDAQ down 1.2% and Russell 2000 was up just 0.6% which creates the relatively unique situation where DJIA and S&P 500 are outperforming both NASDAQ and Russell 2000. In 45 years since 1971, DJIA and S&P 500 have bettered NASDAQ and Russell 2000 just eleven times (Russell 2000 eight times since 1979) over the course of the full year. Seven of those eleven years were flat to downright ugly. Only 1975, 1986, 1989 and 1997 were above average years.

 

 

Generally the Russell 2000 and NASDAQ tend to be comprised of U.S. orientated companies of smaller size which are generally more sensitive to local economic conditions. Poor performance from these companies is suggestive of either current weakness or a tepid U.S. outlook. Additional strength from NASDAQ and Russell 2000 would go a long ways to confirm that the current rally has further room to run.

 

 

Today we will look to take another step at shoring up the Almanac Investor Stock Portfolio with the consideration of five new short trade ideas. Our screens looked for negative revenue and earnings trends. Further restrictions included: a minimum average daily trading volume of at least 100,000 shares over the past 20 trading sessions, share price above $10 and a minimum market cap of $500 million. In addition, we focused on sectors that enter seasonally weak periods in the month of May as previously discussed in this month’s ETF Trades Alert; Banking/Finance, Gold/Silver, Materials and Transportation. All five trade ideas will be tracked in the Almanac Investor Stock Portfolios with a hypothetical $2000 allocated to each.

 

Invesco Ltd (IVZ) is a publicly-owned financial investment manager. The market’ struggles over the past year and a half or so have translated directly to declines in revenue and earnings. IVZ has missed earnings estimates for the last two quarters. IVZ could be shorted near projected monthly pivot point resistance at $32.55 or a breakdown below support at $29.77 with confirming negative stochastic, MACD, and relative strength indications. If shorted, set an initial stop loss 8% above the entry price.

 

 

Knight Transportation (KNX) is a trucking company doing business primarily in the U.S. Sluggish growth, here and abroad, is tempering demand for freight and associated services. KNX did miss revenue and earnings estimates for the most result quarter and EPS estimates for the rest of the year are falling. KNX could be shorted near resistance around $27.58 or on a breakdown below support at $24.24 with confirming negative stochastic, MACD, and relative strength indications. If shorted, set an initial stop loss 8% above the entry price.

 

 

Lindsay Corp (LNN) is technically not a member of one of the four previously mentioned sectors, but it is closely tied to the materials sector. Its two basic segments are water management and road infrastructure. Its irrigation equipment sales have been hit by the slump in commodity prices and the stronger U.S. dollar. LNN could be shorted near resistance at $76.99 or on a breakdown below $68.46 with confirming negative stochastic, MACD, and relative strength indications. If shorted, set an initial stop loss 8% above the entry price.

 

 

Methanex Corp (MEOH) produces and supplies methanol globally. Revenue and earnings have been falling faster than analysts’ estimates. Earnings have missed for four straight quarters. Production has also been hindered in some areas by a lack of raw materials. MEOH could be shorted near resistance at $36.35 or on a breakdown below $29.28 with confirming negative stochastic, MACD, and relative strength indications. If shorted, set an initial stop loss 8% above the entry price.

 

 

Virtus Investment Partners (VRTS) is another publicly traded investment manager that has struggled with the investment landscape over the past year plus. Revenue and earnings are forecast to decline this quarter and beyond. VRTS could be shorted near resistance at $81.45 or on a breakdown below $67.29 with confirming negative stochastic, MACD, and relative strength indications. If shorted, set an initial stop loss 8% above the entry price.