This Seasonal Pick Didn’t Disappoint

By Michael Salvatore June 17, 2024

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We hope you bought last week’s top seasonal pick… Here’s four new picks for this week… Apple makes its new high after WWDC… Jason Bodner’s Quantum Edge Hotlist is stacked with familiar faces and high-quality stocks… The right way to trade earnings…

Solar energy stocks, after being one of the hottest picks in 2020 and 2021, have been dead money ever since.

Just look at this brutal chart of the Invesco Solar ETF (TAN):

From the bubbly 2021 highs, solar stocks are down an excruciating 61%. Not as bad as some SPACs from that era, but hardly where you’d want to place your bets right now.

After looking at this chart, you probably want to run (not walk) away from solar stocks, period. And don’t get me wrong, intuition can be valuable in certain scenarios.

But there’s always an opportunity to trade any asset… as long as it’s the right time.

Last week, we highlighted Enphase Energy (ENPH), a solar power stock, as historically the best-performing stock of that very week. It had an average return of 5.8% and a win rate of over 80% over 12 years of data.

So, how’d it do last week?

I’m writing this Thursday morning, so I don’t have the final numbers in front of me. But I can tell you that from Monday’s close through now, the stock has returned – well, would you look at that, 5.8%.

And that’s after giving back a big chunk of its post-earnings gains. At the highs, the stock was up over 12%:

To be sure, the second idea we mentioned did not enjoy a seasonal bump this past week. Vertex Pharma (VRTX) has dropped about 0.8% from the previous Friday’s close. On the whole, a majority of the stocks on the table we shared were positive.

Now, this naturally begs the question… what’s the top stock for this week? We got you covered…

Using a similar methodology as we did last week, here’s the top stocks for the week of June 17, 2024.

Symbol Trades Win% Avg Win Wins Losses
KR 24 1.9% 66.70% 16 8
DLTR 24 0.9% 62.50% 15 9
JBL 24 1.3% 66.70% 16 8
EXR 19 0.8% 68.40% 13 6

Symbol	Trades	Win%	Avg Win	Wins	Losses
KR	24	1.9%	66.70%	16	8
DLTR	24	0.9%	62.50%	15	9
JBL	24	1.3%	66.70%	16	8
EXR	19	0.8%	68.40%	13	6

Note that this week, win rates were on the whole lower. So we had to lower that threshold to over 60% rather than 70% to find any results.

And while it’s slimmer pickings, we’re seeing much higher average returns across the board, like:

Kroger (KR) has an average return of 1.9% over the next few days, corresponding with its soon-to-come earnings report.
Jabil (JBL) shows a hit rate of over 66%, just like KR, and an average return of 1.3%.

(For those of you who have access to our Seasonality algorithms – that is, Trade Cycles and Platinum members – you should know that these studies are part of an effort to bolster the functionality of our Seasonality tool. Keep an eye out for some improvements coming to Seasonality, and other TradeSmith tools, in the future.)

But this isn’t the only data-driven call we made last week…

❖ Apple didn’t disappoint either…

A big highlight this past week was Apple’s Worldwide Developer’s Conference (WWDC). Each year, Apple hosts this event to show off its newest features to iPhone and Mac developers.

And as we expected, Apple finally waded into the AI waters with an official collaboration with OpenAI to bolster its onboard voice assistant, Siri.

But beyond speculating on the conference’s announcements, we also mentioned last week that Apple’s Worldwide Developer’s Conference was a great potential catalyst to send AAPL to new highs. And once again – that wasn’t borne out of intuition, but data.

We found that over the last 20 years, during a range of June dates when it consistently hosts its WWDC, AAPL rises an average of 3.6%.

The first day of WWDC did seem to disappoint Wall Street, with AAPL falling about 2.5%. But here at the end of the week, AAPL is up almost 9% and in new high territory:

Apple was stuck in a sideways range for almost a year, but now it seems to be out of its slump, at least for the time being.

The breakout to new highs is an extremely powerful tell that the Street hasn’t counted it out. All it needed to do was say “AI”…

❖ And that trend washes through to what the Big Money wants to buy…

Each Monday here in TradeSmith Daily, we’ve been sharing Jason Bodner’s Quantum Edge Hotlist.

You can think of it like a 1,000-foot view for all the recent institutional Wall Street buying and selling activity. The top-ranked stocks are not only at the top of hedge fund watchlists, but they’re also among the top brass of quality in the market.

The bottom-ranked stocks are just the opposite – they’re of poor fundamental quality and saw the big money selling them as fast as they could.

Here’s last week’s list:

GOOGL is getting to be an all-star of this list, with its weeks upon weeks of ranking near the top. But more broadly, we’re seeing a lot of interest in semiconductors, computer hardware, and a rare nod toward solar energy – reflecting what we saw in ENPH last week.

At the bottom, we’re seeing a couple of insurance stocks… two biopharmas, another consistent bottom-ranked sector… and Beyond (BYON), better known as Overstock.

Quantum Edge Pro subscribers and TradeSmith Platinum members get the newest list every Monday afternoon, with this week’s list coming in just the next few hours.

❖ Traders following Derby City Insights are cleaning up …

Last week was a “cleanup” week for the fine folks at our corporate partner Derby City Insights…

In their Earnings Season Pass newsletter, cofounders and brothers Andy and Landon Swan recommended taking over 200% profits on a Restoration Hardware (RH) earnings trade.

In their words, this was a “big swing” trade. If it went their way, they stood to make a huge amount of money in a short time.

But this was no simple directional trade. Smartly, the Swans hedged their position to limit their potential gain, but also ensure the trade wouldn’t completely wipe out.

They did this with a bear put spread. This is where you buy one put option and sell-to-open another at the same expiration date but at a lower strike price.

This second trade generates cash while the first one protects you. After all, unlike the second one, that first option would rise in value even if the second trade goes into the money. This effectively limits your downside just as much as your upside.

If you’re bearish on a particular stock going into earnings, this is a great way to trade it for exactly this reason. Earnings reports are notoriously unpredictable… and even if the trade goes against you, using a spread strategy helps limit your losses.

Here’s Derby City with more:

With an Earnings Score of -46, we took a big swing at RH with a trade that would land us a massive profit if it went our way. LikeFolio metrics pointed to a drop-off in demand for RH’s pricey furniture – consumer mentions were down 7% quarter-over-quarter, and online traffic slowed on a year-over-year basis. We saw a weak housing market taking its toll on this company, and we were right.

Quarterly revenue came in at $727 million. That was in line with expectations but represented a nearly 2% fall from the year prior. But it also reported a significant $3.6 million net loss, along with softening demand growth and a more-than-cautious outlook.

“We do expect the constantly changing outlook regarding monetary policy will continue to weigh on the housing market through the second half of 2024 and possibly into 2025,” said CEO Gary Friedman in his letter to shareholders.

We’ll take this win off the table and secure our profits.

Earnings Season Pass subscribers are rounding out this season, with just a few weeks more to go. But come early July, a new series begins… with top-notch analysis and hand-selected earnings trade recommendations just like these every single week. We’ll be sure to share when membership opens up again here in TradeSmith Daily.

To your health and wealth,

Michael Salvatore
Editor, TradeSmith