EarningsBeats.com Digest

Published: Wed, 04/01/20

EarningsBeats.com Digest for April 1, 2020

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Dear EarningsBeats Digest Member,

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We just made it through one of the most brutal months in market history with a great deal of uncertainty remaining as we head into a new trading month. The month of April should be something to behold as companies start reporting Q1 earnings starting in just a few weeks. And before that? Another look at weekly jobless claims this Thursday followed by the monthly government non-farm payroll report on Friday. Fasten your seat belts!

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A Diamond in the Rough?

There haven't been too many worse industry groups than recreational products ($DJUSRP) since the February 19th S&P 500 bottom. As the S&P 500 tumbled 35.41% from its February 19th high to its March 23rd low, only 27 of the 104 industry groups outperformed the benchmark over that time frame and the DJUSRP certainly wasn't one of them, ranking 75th with a drop of 48.09%. During the ensuing three day surge, the DJUSRP again lagged many of its industry peers. The S&P 500 rallied 20.31% and was beaten by the DJUSRP, which actually jumped a bit higher at 23.88%. But that still only ranked 63rd out of the 104 industry groups as Wall Street has clearly been turning its back on this group. Enter Peloton (PTON), which offers connected fitness programs online. Check out PTON's performance:

In particular, look at the accumulation/distribution line in PTON. It's been rising for the past several weeks, while the price has been falling. That can be a good technical signal, especially given that it fits into the sweet spot of the idea that many will soon be working from home, if not already. While I generally prefer to trade leading stocks in leading industry groups, there are exceptions and I'd consider PTON to be one of those. Should the S&P 500 begin another leg down, PTON may not be immune to the selling, but this stock certainly bears watching as a paradigm shift could place it center stage in 2020.

Happy trading!

Tom Bowley

Chief Market Strategist

EarningsBeats.com
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