Congratulations! You’ve almost survived 2018. And with only half a trading day left, the new year is right around the corner. So after last week’s dynamic price action I think it’s clear: anything can happen next. So let’s take a look at where we’ve come so far in 2018, and where we might go next.
Alright, before looking at specific stock charts I want to recap how things went this year for stocks as a whole. This kind of context is very helpful when filtering down to individual ideas, so let’s start there.
December 2018 Stock Market Recap:
2018 was a wild year in the stock market. And so December might be a fitting end, as it’s shaping up to be the wildest and most volatile month of all. Yet after all the fireworks, the indexes are set to end the year around where they started it. It’s been a lot of activity, but not a lot of accomplishment.
To summarize it all, here’s a weekly chart of the S&P-500, which you can see is bouncing after breaking down below the lows set in February and March earlier this year.
The big weekly candles recently also stand in stark contrast to the low-volatility environment we saw in 2017, which made trend following trading strategies look like a breeze. Today though, I’m much happier to be sitting on the sidelines with dry powder and a buy list of ideas (more on that later).
Because to be fair, the damage in equities this year hasn’t been limited to American stocks. In fact, European markets are near 52-week lows and certainly in a clear downtrend. The VGK ETF is a good way to summarize what this looks like.
And sure, while emerging markets have shown a little bit of stability the last few weeks, it’s been too little too late for the global indexes. Because as an asset class, I think stocks are under pressure around the world, as shown by the weekly chart of ACWI:
I don’t mean to be an alarmist or anything but, in my opinion global stocks look more like they’re near a top than a bottom. And even with last week’s strong bounce, there is still significant support overhead that will need to be worked through if bulls want to really have a run.
Now zooming in to the daily timeframe, I certainly can’t ignore the bounce in equities during the latter half of last week. But my working theory is we’re still in a counter-trend rally that will ultimately top out as a lower high, although I’m open to new ideas.
Here’s the SPY ETF daily chart to show you more closely:
So into the week ahead, I’ll be curious to see if buyers can keep building (maybe up to the $260 level), or if sellers will pounce before then and reassert the downtrend. With a new year set to begin when the market opens on Wednesday, I’m open-minded to the possibility that anything can happen.
And it’s with that spirit that I’m building a watchlist of stocks to potentially buy if we do see more upside Monday morning and beyond.
Free Trend Following Trade Ideas For December 2018 (Part 5):
Alright, before we get into this week’s trade ideas, I just want to reiterate the importance of stop losses and small positions when markets are volatile. You may also want to trail stop losses tighter and take profits more quickly in this kind of top-down environment.
Now first up…
At the risk of pointing out the obvious I want to mention how strongly the precious metals complex performed this week. In the past I’ve pointed out gold and gold mining stocks as potential candidates in this area, but today I want to turn my attention to the silver side of things.
In particular, take a look at the popular silver ETF, SLV:
In my opinion, this is starting to look like a pretty promising bottom pattern. And with any luck, this area of the market could continue to experience some momentum. So I’ll be watching closely to see if silver has another uptrend around the corner.
Meanwhile, it’s not all bad news in the enterprise cloud services market. While many tech stocks have gotten hit in this recent correction, there are still others acting well.
As an example, consider the weekly chart of Okta (OKTA) below. You can see that despite a bumpy consolidation, the stock is still near highs:
This may still have some overhead supply to contend with, but all things considered I think the chart is acting quite strong and may be worth a shot if it can keep popping to new highs this week.
Now moving up the cloud enterprise ladder, another chart I want to point out is Microsoft (MSFT). It’s not exactly breaking out, but it looks to me that support might be coming into play here for a bounce.
If you’re comfortable buying the dip – especially within a longer-term uptrend – then MSFT might be worth a look here. Should the market get some momentum in 2019, I think this is a good candidate.
Finally, I also want to point out the chart of Herbalife (HLF), which happens to be one of the most orderly charts out there. The stock is hitting 50-day highs and coming out of a rather calm consolidation
My hope here is for HLF to keep running, with the long sideways trading range providing a sufficient base to blast off from. Of course, only time will really tell. But I like the look of this setup and expect the risk/reward to be appealing.
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.
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