Dow Stocks To Trade In May

Here is how the month breaks down in terms of the odds of a higher DJIA since 1885 from 4 views:

All months of May: 56.2%

Election Year +3: 55.9%

Decennial Pattern: 69.2%

Both Election and Decennial Pattern: 66.7%

For this month, the cycle/relative strength concept is applied. First, the Dow Jones 30 stocks are ranked from the best performer to the worst by calculating the expected return in that month. The top stocks were screened as follows. The top best traditional performers in the month were then screened for relative strength by a unique measure that sorts by several relevant time periods. Those that pass both screens are buys for the month. The stocks that are both weak monthly performers and weak relative performers are short sales for the month.

This process has been applied to the Dow Jones 30 stocks by buying the top 5 rated stocks and by shorting the 5 lowest rated stocks. From January of 2020, the top five long stocks have risen by an amount about 47% greater than that of the short sales and 28% over the DJIA. The short sales were net negative over that time period at -7%.

Here are the top five long recommendations for this month:

Merck

Boeing
BA

Coca Cola

Disney

Salesforce

Here are the top five short recommendations for this month:

Walgreen Boots

Intel
INTC

IBM
IBM

Nike

Johnson & Johnson
JNJ

Merck is the most highly-rated buy in the DJIA. Below, we take a daily and a monthly view of the stock. Daily, we can see that the relative strength is rising. Monthly, a 14-year relative downtrend has been reversed to the upside. This suggests about seven to eight years of outperformance.

Merck Daily

Merck Monthly