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Long-Short Idea List: 02-28-19

Written by Lance Roberts | Feb 27, 2019

IMPORTANT NOTE: Each week we produce a chart book of 10 stocks which have hit our watch list for potential additions to our long-short equity trading portfolio. With the recent sharp advance in the market, we it has become a difficult task to find potential candidates this week. This is indicative of an overextended bull run that is due for a correction.

As noted last week, the new SCAN TOOL also has several new screening parameters to include both fundamental factors (Piotroski Score) and momentum factors (Mohanram Score) along with Zack’s rankings.

HOW TO READ THE CHARTS

There are four primary components to each chart:

  • The price chart is contained within the shaded area which represents 2-standard deviations above and below the short-term moving average.  
  • The Over Bought/Over Sold indicator is in orange at the top.
  • The Support/Resistance line (green) is the longer-term moving average which also acts as a trailing stop in many cases.
  • The Buy / Sell is triggered when the green line is above the red line (Buy) or vice-versa (Sell).

LONG CANDIDATES

CRM – Salesforce.com

  • After a big decline last year on inventory builds, CRM recovered back to new highs.
  • With the 50-dma crossing above the 200-dma, a breakout to new highs, and a triggered “buy” signal, the bullish trend for CRM remains.
  • Currently CRM is very overbought so look for a pullback to support to add exposure.
  • Buy 1/2 position at current levels and 1/2 on pullback to $150-155.
  • Stop is $145

SRE – Sempra Energy

  • SRE broke out of a long consolidation pattern to new highs.
  • Currently, SRE is pushing 2-standard deviations above its intermediate term trend.
  • Buy 1/2 position now and 1/2 position on a pullback to $115-116.
  • Stop-loss is currently $113

SHW – Sherwin Williams Co.

  • After recovering from last years sell-off, SHW has registered a buy signal and is not complete overbought currently.
  • Buy 1/2 position at current levels and add 1/2 at $420-430
  • Stop-loss is $400

JPM – J P Morgan


  • JPM is very close to triggering a buy signal and is not currently overbought.
  • Price action has become very tight currently and JPM could turn out to be just as viable a short candidate as well as a long.
  • We are erring to the bullish side for now with JPM with very tight parameters.
  • Buy on breakout above $107.50
  • Stop Loss / Or Short on break below $102.50

DG – Dollar General

  • DG broke out to new highs last week, confirming the previous recommendation to buy on a breakout which also triggered a “buy” signal.
  • Add 1/2 position now and look for a pullback which doesn’t violate support.
  • Stop is currently $112.50

SHORT CANDIDATES

CPB – Campbell Soup Co.

  • CPB rallied into resistance following earnings yesterday. However there is a long downtrend at play which is likely going to continue to pressure prices for now.
  • 1/2 position can be shorted at current levels and added to on break below $32.
  • Stop-loss is at $38

BT – BT Group Inc.

  • BT has just triggered a sell signal and broken back through its running moving average.
  • BT can be shorted at current levels with a target of $13
  • Stop-loss is currently $16

BRK/B – Bershire Hathaway, Inc.

  • BRK/B remains on a sell signal currently and has broken recent support levels.
  • The recent debacle with Kraft-Heinz is likely to weigh on the stock for a while longer.
  • Short at current levels and add to short below $190.
  • Stop-loss is currently $210

HRB – H&R Block, Inc.

  • HRB rallied and failed at important resistance
  • HRB currently remains on a strong sell signal and is not dramatically oversold.
  • Short at current levels and add to short below $24
  • Stop-loss is currently $26

GPS – Gap, Inc.

  • GPS remains on a long-term sell signal and is currently in tightening downtrend.
  • GPS will either break up or down from current levels quickly, so a quick trigger finger will be needed.
  • Short at current levels and add to short below $24.
  • Stop-loss is currently $26

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Lance Roberts is a Chief Portfolio Strategist/Economist for RIA Advisors. He is also the host of “The Lance Roberts Podcast” and Chief Editor of the “Real Investment Advice” website and author of “Real Investment Daily” blog and “Real Investment Report“. Follow Lance on Facebook, Twitter, Linked-In and YouTube

2019/02/27
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