May is here, and everything is going as predicted.
On Friday evening, the Night Trader chatroom was buzzing with different strategies for this month.
If you haven’t joined us in the chatroom yet, you really should consider tuning in. It’s incredibly fun, and the casual setting provides the perfect atmosphere for fluid, informative conversation. Call 1-877-211-3024 now to find out how you can join and talk shop with me and your fellow traders.
The main topic of conversation was the opportunities ahead of us, as well as talks of “selling in May.”
I pointed out that we need to hang in there for a few weeks as the seasonality often pushes stocks higher as earnings season continues.
That’s exactly what we are seeing this morning.
Stocks in the “reopening” trade are jumping higher as buyers are returning to the market. Sure, we got some inflationary numbers in the economic data this morning, but that’s not going to slow down the market over the next few weeks.
May will go as it normally does, start with a thrill, and then end with a spill, or at least a fading like the back of the field at the Kentucky Derby.
On a side note, how nice was it to see the running of the Kentucky Derby this weekend?
The event foreshadows a market message that will be a huge factor in your investment success for the next nine months.
And this summer, focusing on just five areas of the market will deliver the biggest profits…
We Are Experiencing the First-Ever Worldwide Reopening
As I’ve been preaching, 2021 will be the year of getting back to the “experiences.”
The technical data is favoring the reopening play.
S&P 500 futures are up 19 points and are trading 0.5% above fair value, the Nasdaq 100 futures are up 53 points and are trading 0.4% above fair value, and the Dow Jones Industrial Average (DJIA) futures are up 170 points and are trading 0.5% above fair value.
The positive bias is another scripted happening.
Stocks traded lower on Friday and the script dictates that market participants buy on weakness. Another part of that script was the low volume trading, where buyers stubbornly refused to enter the market.
In fact, we’ve had a distinct buyers strike affecting the market for the last two weeks.
Sure, the earnings season has brought a few buyers out in reaction to good numbers, but the “market” has stopped buying over the last month. This, combined with the “sell in May” message being delivered to investors with a bullhorn over the last week resulted in some selling.
But there’s a silver lining.
My seasonality studies tell me that the real “summer selling” doesn’t kick in until June or July. Even better, some of the sectors that are part of the re-opening trade – travel, infrastructure, retail, commodities – are late earnings reporters.
That means that this quarter may be positioned to push the “sell in May” trade back to become more of a “prune in June,” situation – I just made that phrase up by the way.
So how do you and I trade this?
Where to Invest Your Money This Summer
I’ve got five areas of the market that I want you to spend the next two weeks following with me.
These are the tradable sectors of the market and one-by-one I’m going to give you the best three to four companies in each group – My best-in-breed stocks from each sector.
By the end of our session, you’ll have a portfolio built to thrive through the summer as everyone else complains about “sell in May.”
Let’s look at one of the sectors that you should be avoiding right now, the pandemic plays.
Stocks like Zoom Video Communications, Inc. (NASDAQ:ZM), Chewy, Inc. (NYSE:CHWY), Etsy, Inc. (NASDAQ:ETSY) and Ebay Inc. (NASDAQ:EBAY) had some of the strongest tailwinds in 2020 as their business models were almost custom made for pandemic operations. As the reopening trade moves forward, these companies are being left behind.
Are they dead? No! They just need time to reinvent themselves, something that will take less time than General Electric Company (NYSE:GE), General Motors (NYSE:GM), or International Business Machines Corp. (NYSE:IBM), but it will take more than a few quarters to get back on track to obtaining the windfall revenue they raked in during the pandemic.
ETSY announces earnings this week, on Cinco de Mayo – the fifth of May for you and I – and the numbers should be something to behold. The holiday season blew the revenue roof off ETSY‘s house, but it has fallen back and now the roof may be on fire.
I’m not expecting a great number from ETSY, which is what it would take for the stock to hold staunch technical support at $190. Personally, I’m looking to short the stock at this level with some deep-in-the-money puts, but I’ll be sharing the details of that with my Night Trader subscribers today or tomorrow.
Night Trader is my premier service, and all subscribers receive real-time, up-to-the-minute alerts for new trades, existing positions, and upcoming market opportunities. Call 1-877-211-3024 for more details on my most exclusive trading program.
You may notice one sector missing from this list…
And that’s cryptocurrency.
I’m not going to recommend any specific coins – I’ll leave that up to my friend and colleague – crypto expert Tom Gentile. Just last week, one of his coin recommendations gave his subscribers the chance to make 100% in 10 days.
Want to receive his next recommendation? He sends a new one weekly. Click here to learn how to receive it.
I’m working on a new sector of “pandemic darlings” that we’ll start dissecting for opportunities like this in my next installment.
We’ll also cover the other side of that list. Companies like American Eagle Outfitters, Inc. (NYSE:AEO), Cemex (NYSE:CX) and others that are going to have a great 2021, and also stocks that you should NOT be looking to sell in May.
So make sure to tune in to my next edition of Straight-Up Profits.
Until next time,