Best Stocks to Buy After a Dow Losing Streak

Only one blue chip has been higher 85% of the time a month after a Dow losing streak

Jun 20, 2018 at 10:37 AM
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The Dow Jones Industrial Average (DJI) on Tuesday extended its losing streak to a sixth session, marking the longest since March 2017. Prior to that, you'd have to go back to November 2016, to just before the U.S. presidential election, for a similar streak. Further, the index surrendered 2.46% during this recent stretch, for its worst six-day losing streak since the August 2015 sell-off. While the DJI is set to snap its streak today, as traders eye Walt Disney (DIS) and soon-to-be-ex-Dow stock General Electric (GE), below we take a look at what to expect for the Dow after these stretches, and which blue-chip stocks to buy now, if history is any indicator.

Dow after 6day losing streaks

Since 1990, there have been 29 other six-day losing streaks for the Dow. The data below -- courtesy of Schaeffer's Senior Quantitative Analyst Rocky White -- suggests the index could outperform in the near term, if past is prologue. The DJI was higher 72.4% of the time on Day 7 (which would be today), and averaged a return of 0.31%. That's far better than its average anytime one-day gain of 0.02% with a 53.2% win rate, looking at data since 1990.

Two weeks after a six-day spiral lower, the Dow was up 0.84%, on average -- more than twice its average anytime return of 0.34%. It's the same story one month later, with the DJI averaging a post-streak gain of 2.23%, with a win rate of 72.4%. That's roughly triple the index's average anytime gain of 0.74%, with a positive rate of 62.8%. 

dow after losing streaks vs anytime

Below is how Dow components performed a month after six-day losing streaks, looking at data since 2010. All of the stocks have 13 returns, and DowDuPont (DWDP) was excluded with just one return.

Dow stocks after losing streaks

Retail giant Walmart Inc (NYSE:WMT) stands alone at the top -- the only stock that was higher 85% of the time a month after a Dow losing streak. WMT averaged a healthy one-month gain of 3.28%. Fellow retail issue Nike Inc (NYSE:NKE) racked up an even higher average return of 4.36%, with a 77% win rate. The highest average return of all blue chips went to Visa Inc (NYSE:V), with a gain of more than 5%, and higher 69% of the time. The lowest post-streak gain went to IBM Corp (NYSE:IBM), which was essentially flat a month after a Dow losing streak.

 

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