Separating Chaffe from Wheat - The Selloff Identifies Future Winners

Although this selloff was painful for many portfolios it can be a useful tool in many ways. One of the most important, in my book, is separating the proverbial chaffe from the wheat - identifying which stocks have been run up by speculators (many of the solar stocks, dry bulk shippers et al) versus those with 'strong hands'.

I'd argue that more money could in theory be made playing with those stocks that have been hit the hardest... once risk is adopted again and speculators flood back into the market. But in this type of market that does not appear to be on the near horizon. Wouldn't it feel more comfortable to have the more stable stocks in your portfolio right now? Those that held up best in this market correction and held key technical support levels? It would be for me, and this sell off was a great opportunity to see who has the best relative strength - this is where technicals come in for me. When I see a stock holding at its 50 day moving average in the ferocious selling of last week thru Monday I see a stock that has strong hands, and institutions supporting it. Those are names I want to be in, so I am compiling a list of these names, most of which I will list below. Now that is not to say these stocks are impervious to sell offs or when true panics happen they will not succumb. But now we have in just a 48 hour period seen a "throw in the towel" near term bottom followed by a major oversold relief rally. So we can see which potential candidates for a portfolio both held up the best, and rallied the hardest. Those are companies we want to put our money with in the quarter to come if you want to balance risk/reward.

I've broken down the stocks below that held their 50 day moving average in the selloff (at most they closed just below that average at the height of the selling either Friday or Monday, but for not more than 1 day) and then rebounded. I've highlighted in bold those that were so strong they were not even sold off down to their 50 day (in general these stocks only sold off to their 20 day average or a bit lower) - these would be in the strongest of hands....

All names below are either in the portfolio or stocks I have strongly considered or monitor on watch lists for consideration to add to the portfolio. I am am still working through my watch lists for additional names, but these are the lion's share. (by sector) These are the names I will be overweighting (or already am overweight) as we move forward for the next quarter. Now that I've raised some cash in this short term spike, I will be looking to redeploy into these names on a re-test of their support levels.

Agriculture - overall this sector was holding up fantastic except for Monday but many names still held their 50 day moving average
Potash (POT) - fertilizer
Mosaic (MOS) - fertilizer
CF Industries (CF) - fertilizer
Agco (AG) - Equipment
Monsanto (MON) - Seeds
Bunge (BG) - many areas of this sector
Agrium (AGU) - fertilizer/retail

Infrastructure - much like agriculture this sector was holding up fantastic except for Monday, but many more names have been damaged technically than in the ag sector - the best of the bunch
Foster Wheeler (FWLT)
Chicago Bridge & Iron (CBI)
Jacobs Engineering Group (JEC)
Shaw Group (SGR) <-- barely holding on

Tech - the 'teflon' stocks as I call them, held up until middle of last week and then had a 3 day bear market of epic proportion; very few survivors after all was said and done
Baidu.com (BIDU)
Google (GOOG)
Ciena (CIEN)
Research in Motion (RIMM)

-> Apple (AAPL) just missed the cut

Coal - all 4 coal stocks, interestingly made the cut; and steel coke producer Massey Energy was in fact the best of the bunch; interesting. Blog readers will know I've been overweight this sector since September but after the recent run up, I cut back but this strength is impressing me. Coal is one of the few things we have left to truly 'export' so the weak dollar helps these guys.
Consol Energy (CNX)
Peabody Energy (BTU)
Arch Coal (ACI)
Massey Energy (MEE)

Solar - the 2 American stocks continue to hold up, and my favorite Chinese stock (for stability - Suntech Power) is finally getting the respect it has long been overdue - but it has been amazing to watch the wipe outs in the smaller, less established names that speculators were taking up to heights that made no sense at all
First Solar (FSLR)
SunPower (SPWR) <-- yes even after losing so much value in the past week it still held its 50 day moving average; this shows just HOW overextended the name was in the $160s
Suntech Power (STP)
JA Solar (JASO)
Yingli Green Energy (YGE)

Refiners - this is a group I have started to warm up to in the past few weeks, the names I bought were the best performers of the bunch technically as well
Frontier Oil (FTO)
Tesoro (TSO)

Other Oil Service/Drilling - most of these have been hit with the fall in oil even though again, oil at $105 or $75 won't adversely effect the vast majority of those I follow; only sentiment changes.
Core Laboratories (CLB)
CGG Veritas (CGV)

Metals/Mining I am/was a bit worried about this group being hit if the 'global slowdown' stoy begins catching fire, but thus far certain names have held up well
Rio Tinto (RTP) [obviously the offer from BHP Billiton has held the price up]
CVRD (RIO)
Mechel (MTL) - this Russian producer of coal / iron could be categorized either here or in the coal area - whatever the case it has held up remarkably well
Sterlite Industries (SLT) - Indian copper

Financials - yes you heard me, financials - I had to sell Blackrock to raise cash to buy other fallen angels, but the relative strength has been wonderful
Mastercard (MA) - credit card processing
Blackrock (BLK) - asset manager
Goldman Sachs (GS) - the news yesterday from CEO that they will have no write offs sort of opens the flood gates for bulls in that name (he would not be saying such things if not true right/ otherwise the lawyers climb out of the woodwork)

Foreign/Other - most Chinese stocks have fallen hard but 2 (pricey) ones I own have held their own, as have the Indian banks
Millicom International Cellular (MICC) - cell service to Africa and smaller South American countries
Silver Wheaton (SLW) - I have been watching this one for a few weeks, but have yet to pull the trigger - might have missed my opportunity as people continue to flee the dollar
New Oriental Education (EDU) - dominant Chinese education/language servicer
Ctrip.com (CTRP) - Chinese travel
HDFC Bank (HDB) - Indian bank
ICICI Bank (IBN) - Indian bank
General Cable (BGC) - surprising strength from this cable maker - sort of a backdoor infrastructure play

So again, this is my 'relative strength' shopping list; they should provide some downside protection if/when they retest their support levels, and should provide some very good upside return once the market regains its footing. I will leave the speculative plays for others at this stage of the year.

SA/SS

Long much of the names above in fund