How To Play The Market Sell Off ? AI Suggests These Stocks and ETFs

Is this the decline market meltdown we have been waiting for? Investors have been at the edge of their seats after the 10-year Treasury yield reached 1.61% on Thursday. While some suggest that this is a result of an economic recovery, others look towards rising inflation. The notion of rising interest rates has led investors to dump shares of tech stocks, handing the Nasdaq its worst single-day performance since October. As speculation and sentiment sends markets on a proverbial seesaw, it helps to have AI for guidance.

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We’re seeing an interesting – and diverse – mix of stocks over the next week and 30 days. Activision Blizzard Inc (ATVI) received a Top Buy rating for the following week. Its Q-Factor Scores are C in Technicals, B in Growth, B in Low Volatility Momentum and B in Quality Value. The other stocks rated Top Buy for the next week are Lilly (Eli) & Co (LLY) – which received a C in Technicals, B in Growth, A in Low Volatility Momentum and B in Quality Value – and Netgear Inc (NTGR), which earned factor scores of F in Technicals, B in Growth, A in Low Volatility Momentum and A in Quality Value.

Looking at the stocks rated Top Short, E.L.F. Beauty Inc (ELF), which earned scores of C in Technicals, D in Growth, D in Low Volatility Momentum and D in Quality Value, will hold its rating for the next week. For the next 30 days, American Airlines Group Inc (AAL) is a Top Short with a very bad report card to show for it. Its Q-Factor Scores are F in Technicals, F in Growth, C in Low Volatility Momentum and F in Quality Value.

Rounding out stocks, we’re seeing a repeat from last week for Lamar Advertising Co  -Cl A (LAMR) and Western Digital Corp (WDC). Both on the shortlist for the next 30 days, Lamar Advertising is a Top Buy with factor scores of A in Technicals, A in Growth, B in Low Volatility Momentum and A in Quality Value. It’s been a strong start to 2021 for the advertising company. According to a press release that went out on Friday, it reported impressive revenue growth that exceeded its target by $14.64 million. On the other hand, Western Digital is rated Top Short and has received the following Q-Factor scores: F in Technicals, D in Growth, D in Low Volatility Momentum and F in Quality Value. 

Energy continues to dominate with the United States Oil Fund (USO) and United States Natural Gas Fund LP (UNG) ETFs each receiving Top Buy ratings. Other ETFs with a Top Buy rating for the next week include SPDR S&P Metals & Mining (XME) and SPDR S&P Kensho Smart Mobility (XKST). SPDR S&P Kensho Smart Mobility (XKST) is also rated Top Buy for the next 30 days. 

For the next week, iShares 1-3 Year Treasury Bond (SHY) and VanEck Vectors J.P Morgan EM Local Currency Bond (EMLC) are both rated Top Short. Bonds have consistently landed on our list of ETFs with a Top Short rating, so this pattern is consistent with previous weeks. Some other Top Shorts for the next 30 days include Invesco S&P Emerging Markets Low Volatility (EELV) and iShares MSCI Hong Kong (EWH), an ETF that exposes investors to large and mid-size companies in Hong Kong.

Some of our favorite options trades this week: 

Short Put Spread in VanEck Vectors Gold Miners ETF (GDX) – Bullish trade idea on one of our top ETF ideas.  Introduces exposure to mining sector and precious metals for investors looking to add implied hedges for pro-cyclical stocks portfolios.

Short Put Spread in Activision Blizzard (ATVI) – Bullish trade idea on a top consumer tech idea.  Introduces exposure to video game sector following recent run-up in Gamestop (GME).

Long Call in Energy Select Sector SPDR Fund (XLE) – Bullish trade on of our top ETF ideas and introduces exposure to energy stocks.  Given rising correlations among energy stocks, might make sense to own a basket of securities rather than focus on individual stocks. 

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Performance Update

It was a good start to the year for our AI models. Our monthly top buys for stocks have outperformed the SPDR S&P 500 ETF by over 27% since December 2013, generating a total return of 157%. In January, our top buys were up 1.37% vs -1.02% for the SPY ETF.† You can find this full list of monthly top buys for stocks and ETFs in a simple and easy to understand table on the AI Investor Investment Discovery platform. Sign up here to try it for free for one month.

The Latest

Following the FDA Medical Advisor committee endorsement of the Johnson & Johnson vaccine, it’d make sense for the stock to receive a Top Buy rating from our AI. Read our full analysis to determine whether that is the case. 

Despite the massive rotation we’re seeing with tech stocks, there’s still plenty of stocks with a Top Buy rating. These are the latest from this week.

Nasdaq’s rough sell-off on Thursday has uncovered plenty of opportunities to short-sell. These are the top stocks our AI has rated Top Short.

†As of 1/31/2021. The calculated returns above are based on paper trades and back tests during the relevant measuring period and therefore represent hypothetical performance. The average holding period for each security is 1 month with the return calculation assuming an equally-weighted theoretical portfolio. Returns reflect full reinvestment of dividends. The hypothetical returns do not include advisory fees or transaction costs as Qai does not maintain an investment advisory business and has no assets under management. However, an investor paying a professional advisor would have its return affected by any fees or commissions paid. Past performance is not an indication of future returns. Changes in economic conditions and market factors will affect the returns of investments in different ways. Any investment involves a risk of a loss. All information herein is from sources believed to be reliable but have not been independently verified. No representation or warranty can be given with respect to the accuracy or completeness of the information, and is subject to updating, revision, and amendment. Hypothetical returns are shown against the actual returns for the SPRD S&P 500 ETF Trust (SPY) during comparable periods. The strategy is based on buying an equal amount of all stocks ranked as Top Buys by the Q.ai Factor Models for US Large-Cap Stocks (and an identical back tested strategy employed in the earlier stages of the measuring period January 1, 2017 through January 31, 2021). The Q.ai Factor Models are calibrated to focus on capital appreciation. Q.ai is the trade name of both Quantalytics Research, LLC and Quantalytics Holdings, LLC.