For this month, the cycle/relative strength concept is applied. First, the Dow Jones 30 stocks are ranked from the best performer to the worst by calculating the expected return in that month. The top best traditional performers in the month were then screened for relative strength by a unique measure that sorts by several relevant time periods. Those that pass both screens are buys for the month. The stocks that are both weak monthly performers and weak relative performers are short sales for the month.
The markets are expected to rally and hit new highs at the end of April, so the long trades are still favored.
This process has been applied to the Dow Jones 30 stocks by buying the top 5 rated stocks and by shorting the 5 lowest rated stocks. From January of 2020, the top five long stocks have risen by an amount about 64% greater than that of the short sales and 20% over the DJIA. The short sales were net negative over that time period at -5%. In March, the long selections rose by 2.91% versus 2.17% for the benchmark and a 2.08% gain for the short selections.
Here are the top five long recommendations for this month:
Disney-DIS
Amazon
AMZN
American Express
AXP
Microsoft
MSFT
VISA-V
Here are the top five short recommendations for this month:
Boeing
BA
Amgen
AMGN
United Health-UNH
Procter & Gamble
PG
Nike
NKE
Disney is one of the only large-cap stocks that is not overbought on a monthly basis. In fact, it is oversold and shows higher lows in momentum. Price has reversed downtrends both weekly and monthly. Relative strength has reversed a 3-year downtrend. The shares will likely reach $130 short-term, and $150 to $175 before yearend.
Disney Daily, Weekly, Monthly
On the short side, United Health is likely to mover lower. April is one of the three weakest months to hold the shares. Relative strength peaked in the autumn of 2022 and recently made a new low. Three to six months of relative strength is usually a prerequisite for a rally. So, it will be some time before these shares can sustain an uptrend. The monthly strip shows a price consolidation. A break of the $470-$475 level is likely to send price much lower to $400 or lower.
UNH Daily, Weekly, Monthly
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