Free Trend Following Trade Ideas for April 2019 (Part 4):
Happy long weekend! It was a short and quiet trading week heading into the Easter holiday. So I hope you’re enjoying the extra day of rest. And hopefully, today’s market recap and stocks picks will help you make the most of this downtime and get started on the right foot next week.
Now to really kick things off this morning, let’s recap some of the bigger picture trends to summarize the market price action. And then after that we can look at some specific trade ideas (both breakout and pullback).
So let’s get into it!
April 2019 Stock Market Recap (Part 4):
Global Stocks Back to Summer 2018 Highs:
It’s been a pretty remarkable recovery this year in stocks globally. For the big picture, I think the All-Country World Index ETF (ACWI) is an easy way to see how equities around the world are being treated by investors:
Notably, prices are now back towards the top of their 2018 trading range, and actually not all that far from the 2018 top last February. So it’ll be curious if we start to see some resistance come online, or whether stocks just continue to grind up.
As a trend follower, my approach is simply to let prices be my guide and do my best to follow along for the ride. But the other reason for my bullish lean is because of the strength in many of the underlying components of the market. For example…
Emerging Markets Still Trending Up:
One big factor throwing a wet blanket on global equities last year was the slump in emerging market stocks. Pretty much from start to finish, this group was on the hind foot. Just take a look at the EEM ETF chart to see the downtrend, as well as how these stocks have reversed higher this year:
So all things considered, this looks like a pretty constructive change in pace. Whether the reason is due to accelerating overseas economies, the perception of an easier Fed, or a China-US trade deal, I’m not really sure.
But at the end of the day prices appear to be making higher highs and that’s what counts for me. And it’s not just emerging markets.
Are European Stocks Out of The Woods?
Alongside emerging markets, European stocks also seem to be starting the year much more productively too. Although in my opinion (and similar to US stocks) a lot of these indexes look a little stretched given the severity of this recent bounce.
The VGK ETF is an easy proxy for European indexes as a whole:
Now one of the reasons I think this is so notable is because when you look at Europe, there’s not shortage of bad news. From worsening PMI data in Germany, to Eurosceptic political parties gaining traction, it really feels like the continent is at risk of recession and thus lower stock prices.
But the price action says otherwise! And just like when a stock rallies on a seemingly bad earnings result, I prefer to let price action be my guide. So on the weekly chart above I’ll be watching how price acts as it heads back to the bottom of the 2018 trading range.
There’s one more wild card to consider though too.
Earnings Reactions On Watch:
With earnings season in full swing, a lot can change. After all, companies aren’t just sharing their past results… but also… their future outlooks. And how the market reacts to this should be telling!
Consider: Going into January’s earning season, expectations had come down quite a bit (as had stock prices!) Then many companies reported strong beats and prices have trended higher ever since. So will we see that dynamic again?
On the other hand, what if we see companies beat expectations, provide strong guidance, and then still sell off anyway? So be alert, because things can change at a moment’s notice
Further to the point, exactly how you trade earnings season is really up to you (and will depend on things like your personal risk tolerance, time frame, level of diversification etc.)
In case you’re curious though, here’s how I trade through earnings season. What works for me may not work for you. But it could help you get started thinking in the right direction.
Alright, before we get into specific stock picks, let’s just quickly look at the top-down picture in US markets to help provide a bit more context.
US Stocks Still Near All-Time Highs:
Similar to European stocks, US indexes have bounced hard all year and with the exception of small caps, are back near all-time highs. So overall there’s not much to complain about.
Here’s a look at the weekly chart of SPY to show you what this looks like:
Now to be balanced, I think a fair criticism from bears is how stocks have bounced SO much already; thus, they’re due for a pause or pullback. And as I said, earnings season is another wildcard that could change the course of momentum in short order.
Plus, there’s some relative weakness in small caps (IWM), which remain much further below their all-time highs, compared to large caps:
And along the same line, last week I mentioned healthcare was in a precarious spot. Then this week, the sector got hit hard again. Here’s XLV to give you an idea of the damage:
The good news is, I think there’s a reasonable case to be made this is a sector-specific issue, based on tweets from Presidential candidates about reigning in costs. And at the end of the day, XLV is bumpy but hasn’t made a lower low on the weekly timeframe above (yet).
So until we see this weakness spread a little more, I think it makes sense to keep looking for opportunity in leading stocks and sectors.
Because aside from these select pockets of weakness, growth stocks like consumer discretionary and technology are once again trending back towards all-time highs
With that in mind, let’s dig into some individual stock charts.
Free Trade Ideas For April 2019 (Part 4):
As has been the case for some time now, the biggest challenge finding breakout stocks is looking for ideas that aren’t too extended. This is especially the case for the weekly charts out there, many of which have gone nearly vertical year-to-date.
The good news is, FinViz shows there are over 500 stocks finishing the week within 3% of 52-week highs. So there are lots of uptrends to choose from.
And the first one that caught my eye was actually Costco (COST). This retail powerhouse has been consolidating in a trading range the last few weeks right below all-time highs. I think it could be worth watching for a surge of momentum.
The other thing I like about this trade idea is how it’s relatively easy to manage. I think you could even use a tighter stop than usual, just below the current trading range. And with an earnings beat already reported last month, this one might be able to keep trending.
Now another retail name that has my attention right now is Five Below (FIVE). This low-priced retailer has done an exceptional job growing revenue over the last ten years. And despite a lofty valuation, the underlying operating trends look to be accelerating (both in the business and stock price)
So all that to say, I’d be willing to bet 52-week highs on the chart below could beget more highs in the months to come (although that assumption will be tested by the early May earnings report).
This is in reinforced a little further by the fact that this new high comes after a year of backing and filling from the first time this stock tested the $130 level that acted as resistance. I would give this one a wider stop though due to the volatility.
Along the same lines, I’m also interested in the chart of Toro Corp (TTC), which has made quite a comeback from a big 2017 earnings miss. Take a look:
Now to be fair, this stock has rallied extensively already. But the strong breakout at $71 combined with fundamental operating results that continue to chug along to record highs, I think momentum could persist. Earnings aren’t yet confirmed but I expect they’ll come out in early May.
Next up, I want to point out the chart of WNS Holdings (WNS), which is perking up to new highs after a long consolidation period too. The bonus with this one is it isn’t extended yet at all:
So after a year of sideways action, can this chart keep moving? Well, anything’s possible in the world of stock trading, including a new potential uptrend!
Alright, while there are lots of breakout stocks out there to trade, a lot of people have been asking me lately for ideas on how to trade pullbacks. That’s why I also want to share a few dip-buying trade ideas this week, as they can present attractive risk/reward setups.
Dip-Buying Trade Ideas For April 2019:
Now you might be surprised to see a trend follower talking about dip buying. And I don’t blame you! But the truth of the matter is, just like you can diversify your investments across asset classes, you can also diversify your trading across different trading strategies.
And since no trading strategy is perfect in every market condition, different strategies can work together to potentially smooth out your results. Plus, because so many readers asked for pullback trading ideas, I wanted to share a couple that come to mind right now.
And By The Way: In response to this popular demand, I actually wrote a +90-page ebook to compile everything I know about how to get started with dip-buying trading. It hasn’t fully launched yet but, you can get early access here if you’re curious.
Now as for today’s dip-buying ideas…
First up, one stock that might be worth a shot for a dip-buy is uniQure BV (QURE). This chart has gotten dragged down with the rest of the healthcare space. But it’s not reaching oversold levels as it tags the rising 50-day MA.
If the longer-term uptrend can reassert itself, QURE might be able to bounce in a meaningful way. It’s also got some potential support below the recent price which might further tip the odds. And by the way…
You’ll notice on these charts that I do like to manage dip-buying trades on the daily chart timeframes. I find these types of trades tend to play out a little bit quicker than the long-term trends I focus most of my trading on.
The other dip-buying opportunity that has my eye right now is the chart of Funko, Inc (FNKO). Take a look:
From my perspective, FNKO been trying to carve out a slow and steady uptrend the last few quarters but in recent weeks, the stock has fallen on hard times and the CFO actually resigned last week. Now this may be an ominous sign. But this sell-off could also be an over-reaction.
As long as you mange risk with a plan for how to size your positions, and when to sell, I think these ideas may be worth consideration. Make sense? Great.
Now before we finish…
I also want to share my existing trend-following trading positions for US-listed stocks with you. So here they are in a FinViz watch list! Take a look if you’re still itching for more potential trade ideas.
They might be of interest because everything is laid out in charts so you can easily see what’s what.
Because actually, there have also been a lot of great trends this week so I’m quite bullish on many of my existing holdings.
I hope seeing my current stock portfolio helps give you more context on how I’m seeing the current market, AND, where I’m placing my bets.
While I’ve obviously shown you some of my favourite picks for the week ahead, I can also help teach you how to fish for your own trading ideas!
Just keep reading.
Learn How to Scan For Breakout Stock Picks:
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Well… it’s a +90-page PDF… packed with everything I know about finding, buying and trading breakout stock picks.
This Blueprint shares the EXACT step-by-step process I use to find and trade stock picks each week (just like the ones above). So…
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