Free Trend Following Trade Ideas for August 2017 (Part 3):
The fun continues… sort of! Because so far, August 2017 has been a tough go for breakout traders and long-term investors alike. So in this week’s free trade idea update we’ll look at the broad market weakness, and discuss what’s next.
… So where should we start?l
Well, the best way to set the scene quickly is to review the weekly performance on the major market indexes. Here’s a look from Google Finance:
As you can see, markets sold off quickly Thursday morning and continued to drip down for the rest of the week.
In what felt like a change of character, rallies were sold off quickly.
That said, there were some pockets of strength (more on that later). And as shown in the chart below, the major trend still remains UP… for now!
Even though stocks are still technically trending higher, it does feel like stock market bulls would like to see some stability soon.
Because if you look around, there are some areas of the market that look a little troubling.
Small cap stocks are really failing to get going. And hopefully the IWM chart (small cap ETF) will find some support soon after four weeks of selling.
Keep in mind, back in November 2016 many media outlets reported small caps would outperform, due to an America-first policy. But it seems that hasn’t been the case.
Another cause for caution is the sector performance in the S&P-500. The defensive utility sector continues to lead, which doesn’t exactly scream risk-on.
On the other hand, one thing that caught my eye… AND despite the absolute carnage in energy stocks… oil seems to be finding some stability.
Of course it’s not out of the woods yet…
But the fact that oil prices haven’t rolled over again is a promising start!
And hopefully energy bulls can build on this strength to breathe some life into the beleaguered energy complex.
By the way…
In case you’re curious, I’m currently around 13% cash, but have many stops on the very verge of triggering. If the weakness continues next week, my cash position will really start rising quickly.
And at the close on Friday, I was stopped out of MKTX, XLNX and AGCO.
My total open risk is actually a positive number right now. So even in the worst case scenario, my net worth won’t be significantly hampered.
It’ll be a big drawdown, don’t get me wrong. But…
“It’s fun to play with the house’s money!”
So even though we have a narrowed-down set of opportunities today. Let me show you where I’m looking for breakout stock picks.
Free Trend Following Trade Ideas for August 2017 (Part 3):
As we’ve been saying, with small-caps stalling and utilities leading, there aren’t as many trend following ideas as stronger weeks. But on the other hand…
Even when you feel a little cautious and worried about the market, it’s important to stick to your trading system.
“The truth is, nobody knows what will happen tomorrow!”
With that in mind, let’s move on to some specific trade ideas. And even though things have been bumpy in the US, there are others area of the world that are worth considering.
Breakout Chinese Stocks For Trend Followers:
The first stop on the map today is China. To recap…
Baozun Inc (BZUN) has been ripping higher lately. And with earnings being announced early next week, the volatility is sure to continue.
Here’s a look at the weekly chart:
While this is a fast-moving stock, volatility can present opportunity. Just be careful with the proper position size and a well-planned stop loss.
Personally, I’m considering adding on strong earnings results, with a stop around $5.50 below my entry price.
In addition to BZUN, some of the larger Chinese technology stocks have really been rocking. This was a great week for Ali Baba too. And…
While I wouldn’t be chasing BABA to put on a full position here, the chart does look good. And you could start a small position to get some exposure before waiting for a bit of a consolidation (assuming it comes).
Finally, as I mentioned at the start of the month, shares of Weibo Inc (WB) also continue to grind higher. SINA and TCEHY have similar chart patterns that might be worth a closer look too.
Of course you don’t want your whole trend following portfolio to be made up of one kind of stocks. So let me show you a few non-China ideas too.
Breakout Trend Following Stocks in Latin America:
While I often prefer to buy US-based stocks, right now it seems like Latin America is presenting even more opportunity.
So in order to keep my money working as hard as possible, this is where I want to look.
First up, let’s pay a visit to Argentina Telecom. The ticker is TEO, and as you can see, the stock is trending higher quite nicely:
The other southern-hemisphere stock I want to show you today is based in Peru. Meet Credicorp Limited.
As you can see, the BAP stock price continues to trend up. And I’m always encouraged when stocks like this can close out the week at their highs.
Plus, the stock offers a small but growing dividend which can always help your total return if riding longer-term trends.
Even though these stocks are in Latin America, they can certainly be worth consideration. And hey, if the US dollar continues to weaken, maybe these USD-denominated securities will continue to outperform.
But I understand…
If you don’t feel like buying ADRs and want to stick to your home-country market, let me point out a couple of American companies that are continue to stand out from the crowd in the current market environment.
Other Trend Following Ideas for August 2017:
Despite the tough week for most US stocks, there are still a couple of ideas that jump out at me. For example…
I think the most blatant breakout stock this week was one of my current positions, ISRG.
As shown in the stock chart below, you can see ISRG shares have gapped higher and closed the week at their highs:
And I understand it can be difficult to buy stocks after they’ve already gone up. But in this case we’re playing for a breakaway gap to power the next leg higher.
As long as you have a reasonable position size and responsible stop loss, why not take a swing?
The next area of the market that has caught my eye are the video game stocks. While I am certainly no gamer myself, the relative strength in this industry has been impressive.
In particular, check out this chart of the video game ETF, GAMR:
This relatively new ETF is trading near the highs and could be ready to breakout. I’m even more optimistic because many of the underlying components are also charging higher. You can read more about this ETF here.
I also pointed out on StockTwits that IAMGOLD shares are also looking pretty good. Plus, as a gold company, IAG might add some diversification to the rest of your stock portfolio.
To be honest, I don’t often trade gold miners (the fundamentals are generally atrocious). But I picked up some shares of IAG Friday with a stop just a few pennies under $4.95.
If you’re screening for stocks this weekend, (I like to use FinViz), try searching for stocks slightly below their recent highs.
Personally, I usually prefer to buy breakouts. But during these broader market sell spurts, it can pay to look under the surface a little.
Instead of hunting for stocks making new 52-week highs, try adjusting to find stocks a few % below their recent peaks.
You can more easily find stocks that might be setting up for the next leg higher. And chances are, they aren’t too extended either.
For me, Baxter Healthcare (BAX) is a good example of this. You can see the stock has consolidating a bit and may be looking to push up in the weeks ahead.
But BAX isn’t the only one like this. Other stocks like FOXF and CDNS are also consolidating or bouncing from a recent sell-off, too. Though we’ll likely need the market overall get going, for these to breakout again.
My point is, when market conditions change and your stock screens are coming up empty, adapt your approach to stay prepared and able.
Speaking of… let me show you what stocks I’m still holding in this changing market environment…
Get Inside My Current Trend Following Portfolios:
To help you see even more ideas, and how I’m managing my own trend following trading positions, check out my portfolio on FinViz.
There are a few Canadian stocks that FinViz doesn’t support (KL.TO, WEED.TO, QBR.B.TO, WJA.TO). But the link above is representative of most of my portfolio and will hopefully give you even more breakout trade ideas!
BUT, you don’t have to stop there… because…
If you want to learn how to find stock picks and trading ideas like this for yourself, well, just keep reading!
Learn How to Quickly Scan and Trade Breakout Stock Picks:
If you want to learn more about how I find these kind of stock picks, I encourage you to check out my Breakout Stock Blueprint! What’s that, you ask?
Well… it’s an 80-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…
If you want to see how to find high-potential-momentum stock picks, learn how to let your winners run and be confident about locking in profits, then this blueprint is for you.