My Top Stock for the Eight-Day Market Upswing By Lucas Downey, Editor, TradeSmith’s Alpha Signals A month ago, few could have imagined what we’re witnessing today. By now, I’m sure you’ve heard the news. As I write this on Friday, the S&P 500 is on a hot streak, gaining eight days in a row. I’ll be frank: I am not at all surprised given the epic gyrations in April. Monster whipsaws often trigger during market meltdowns… signaling sunnier days. And boy did we get them. Last week I told you of a powerful three-day thrust signal suggesting more upside is ahead. Today’s signal study will be similar but looking at the eight-day win streak. We’re also going to dive deeper and unpack one sector that’s caught in this updraft… Hang around until the end and I’ll highlight a top-ranking stock to ride this train higher. S&P 500 Jumps Eight Consecutive Days From the low on April 8, the S&P 500 has notched a massive 14.3% gain. The tech-heavy Nasdaq 100 is up a blistering 17.9% over the same period. 
The latest eight-day win streak is helping these gains, with the index powering near 5700: 
The first question we need to answer is this: How rare is an eight-day win streak? From 1978 I was able to locate 43 prior instances. Keep in mind these are looking at all eight-day periods where stocks gained each session. Some streaks went on to nine days and longer. The second question is, what happens next? For this study, I also included nine-day win streaks for comparison, which tallied 18. Here’s what happens after the S&P 500 gains for eight consecutive sessions: - Out to 6 months, stocks are roughly flat
- 12 months later we see a small average gain of 5%
- 24 months later we see a solid 22.1% gain
At first glance you may frown… This chart may have you wanting to take some profits. If you bought into the crash a month ago and want to lock in gains, be my guest! But here’s the real truth about the mixed message above: These funky returns are heavily skewed by poor performance in the ‘80s and early ‘90s. Beginning in 1992, these consecutive rips typically led to more upside. | Recommended Link | | | | Markets are volatile, uncertainty is everywhere, and Americans are trying to protect their wealth. Fortunately, millionaire trader Jeff Clark has revealed a powerful strategy built for times like these — one that doesn’t rely on predicting the market. Rather, Jeff’s strategy takes advantage of the chaos to uncover potential gains. It all centers around one single stock designed to prosper whenever gold moves, no matter the direction. In a market full of noise, this is a signal worth paying attention to. |  | | This Sector Has Been in a Serious Rally Speaking of upside, one sector has been in lockstep with this powerful market move: Industrials. The S&P 500 Industrials sector has also gained an eye-popping eight days in a row. For reference (not exact) I’ll use the Industrial Select Sector SPDR ETF (XLI) to showcase this point. It’s been in a serious rally: 
Going back to 1995, I found 42 prior eight-day win streaks. The forward picture is more appealing than the former study above. When the S&P 500 Industrials sector gains eight days consecutively, here’s what happens: - 3 months later they gain a modest 1.9%
- 6 months later the group is up 6.6%
- 12 months later they bounce 11.7%
- And 24 months after, you’re looking at 27.8% gains
That’s not too bad if you ask me. But we can do better. Inside sectors are stocks. And some stocks tower above others. I found one name in the industrials patch that is not only participating in the current rally… History also suggests that train isn’t stopping anytime soon. A Top-Ranking Stock for the Industrials Rally Trane Technologies (TT) came on my radar due to its recent relative strength. Below you can see the one-year chart and how this HVAC player has gained handsomely the last eight sessions: 
Interestingly, I wrote about Trane back in September. You can check that piece out if you want to see why I liked the name back then. Let’s see what history can teach us about the latest eight-day streak. Back to 1990, I found 43 instances where TT gained eight days in a row. Here’s what happens after TT gains eight days consecutively: - 3 months later shares pop 8.9%
- 6 months later shares gain 13%
- 12 months later shares power 30.3%
- 24 months later the stock averages a 45% return
And this jives well with my favorite TradeSmith indicator, the Quantum Score. Jason Bodner’s Quantum Edge system scours millions of data points every day to find those rare stocks with the key characteristics best predictive of higher prices: - Superior fundamentals – a growing and profitable business
- Strong technicals – positive trading action
We can see Trane ranks very well both fundamentally and technically with a Quantum Score of 74.1. Above 70 is the green zone: 
When you have powerful evidence on a top-quality stock, pay attention! And if you’d like to learn more about how Jason’s system sorts through all the data and makes the best stocks easy to find with just a few clicks, you can go here for more details. While I can’t predict where we’ll be tomorrow or even next week… What I can do is study history and make smart decisions. Over time, that’s a winning strategy. Markets are violently jumping after an extreme washout. This level of advance won’t keep this pace forever. So be prepared to rebalance your portfolio as better prices emerge. TradeSmith has outstanding software to help you hop on the best emerging trends out there. Based on this historical analysis, the train is just now leaving the station. Don’t miss it! Regards, 
Lucas Downey
Editor, TradeSmith’s Alpha Signals | 
No comments:
Post a Comment