This fourth list of individual stocks comes from another investor who is interested in the tranche momentum model analysis. Again, many of these ticker symbols are familiar to those who deal primarily in individual stocks.
Tranche Momentum Recommendations: From this list, only one passes the stringent dual momentum (absolute and relative) and REDA screens. Before I get to that stock, take a look at which ones to sell.
- First on the chopping block are those stocks that are under-performing SHY. Those are listed in column three and are coded red. Only eight of the 17 pass the first absolute momentum screen. Those are the ones coded green.
- Sell stocks that are priced below their 195-Day Exponential Moving Average (EMA). Note the correlation between the stocks coded red in column 3 with those coded red (negative) in column 11. Why do we use this second sell signal? From Faber’s book, The Ivy Portfolio we find this research. “Our research has shown that returns are lower and volatility is higher when asset classes are below the 10-month moving average.” Ten months is very close to the 195-Day EMA, although the EMA is faster moving. Note that Faber attributes this information to asset classes, not individual stocks so this second sell signal is not a perfect fit with their research. However, there is a high correlation between these two sell signals.
Buy Signals: To be a candidate for a buy, the stocks must be outperforming SHY. That leaves us with eight (8) stocks. Of those eight, only BXMT is a buy at this point. It has a Group rank of 2, which is very high (1 is best) and both H-A candles are positive. When I ran the BXMT:VTI performance ratio, the stock just makes the PnF ratio cut.
Due to the large market drop this week, I likely would continue to hold ABBV, ICE, MDT, and UNH as it is the short-term HA candle that is showing up negative (red coding). Any kind of upturn will turn this indicator positive.