Buy Choice Hotels And Sell Short Apple

The market is likely to be flat in the coming week. On the 28th, the 1.88 year cycle tops adding to the likelihood of the usual September weakness. The selling is likely to be concentrated in the big tech leaders. Improving relative strength in the small-cap stocks and the broad-based and equally-weighted Value Line index of 1600 stocks provides some buying opportunities in lesser known stocks. Here are a pair of recommendations.

Choice Hotels has been rated highly on the Cycles Research screens. In the three-up chart below, we see that there have been price breakouts daily, weekly, and monthly. Weekly, a relative strength downtrend is being reversed. The seasonal trend is improving as can be seen in the monthly histogram.

Choice Hotels-Daily, Weekly, Monthly

Choice Hotels-Monthly Histogram

Red- Percentage of times that price rose in month

Blue- Percentage change in month

Green- Expected return (product of the first two)

Apple’s
AAPL
share price has already displayed weakness. Weekly momentum is overbought and is turning down. Daily relative strength is weakening. The share price has fallen 65% of the time in September for an average loss of 4%. It has been the weakest NASDAQ
NDAQ
stock in that month. Supporting the idea of a weak month in September is the monthly cycle depicted in the last graph. However, Apple has risen in the following month of October. The stock has risen 71% of the time for an average 6.5% gain. The average low has been in the first week of October. These two months provide excellent opportunities for traders.

Apple-Daily, Weekly, Monthly

Apple Monthly Histogram

Apple Monthly Cycle

Apple Monthly Cycle