Free Trend Following Trade Ideas For February 2019 (Part 3):
And the bulls just keep going! There’s no denying the strength of the buying so far this year. And despite some short-term overbought conditions, there aren’t too many signs of things slowing down!
So let’s take a closer look at the price action under the surface, and then I’ll show you some of my favourite charts for the week ahead. Plus…
Now before we get into specific stock charts I always like to take a step back and look at the broader market environment to help provide some context for expectations. And right now, well I’ve got to admit, the price action sure is interesting!
February 2019 Stock Market Update:
It’s been pretty remarkable to watch the market the last couple months. First, December’s hair-raising decline featured a dramatic increase in volatility, with prices routinely moving 3-4% on an intraday basis! And then…
Everything turned around on a dime! After the Christmas Eve low, buyers got to work and have hardly taken a day off since. This sure does look like the definition of a “V-shaped” bottom, at least for the time being…
In addition to the relentless buying, the other thing that stands out to me about this chart is how the headline index has finally managed to close above the 200-day moving average for a couple days in a row.
Now to be fair, the slope of the 200-day MA is really what’s of interest to me. And at present, the flat trend-line tells us the longer-term trend is decidedly undecided. It’s a good reminder of the bigger picture context.
Another good reminder is the SPX weekly chart, which despite having rallied an incredible amount, is still only back to the December highs. The index is still over 5% below the all-time from last year.
So looking ahead into the end of February, I’ll be very curious to see how prices act as we approach the December highs. Will we consolidate in a tight bull flag and break higher? Or, could we see a violent reversal as sellers finally come out of the woodwork? It’s important to keep an open mind.
But in the meantime…
I’ve been cuing off the Russell 2000 ETF (IWM), and have been comfortable adding long exposure as long as we’re above the 10-day EMA. So far, that’s been a good enough heuristic.
Because as I pointed out above, on the weekly timeframe I don’t think bulls are completely in the clear yet. A lot of prices of stretched and it’s reasonable to expect bears might try to push their agenda another couple times. But until we start seeing signs of weakness (rather than dips being quickly bought), I’m leaning bullish.
And on that note…
One of the biggest challenges right now is actually finding ideas that haven’t gone up too much already! Because while there are certainly a lot of 52-week highs, many of the charts look overdue for a correction. But on the other hand, there’s no rule that says such a correction has to come right now!
So that’s why I always buy with a plan for when to sell, and am careful about position sizing. Now with those caveats out of the way, here are some ideas that are on my radar for the four-day trading week around the corner (recall, markets are closed Monday for President’s Day).
Trend Following Trade Ideas For February 2019 (Part 3):
Okay, to start things off today I want to go back to a momentum favourite that’s finally perking up again. So take a look at Shopify (SHOP):
Now I think it’s fair to say this stock is at least a little stretched here. But after a year of going sideways and all dips being bought, it’s also possible it could keep stretching. With earnings out of the way, I’m curious if this one can keep coasting higher.
But you know what? It’s not just cloud-software stocks that are moving higher. Because believe it or not, there’s actually some impressive momentum in the waste management industry.
And while WM made headlines with strong earnings last week, my favourite chart in that space is Casella Waste Systems (CWST)
This one hasn’t confirmed earnings yet but based on last year’s calendar I suspect it’ll be coming up in a couple of weeks. And on that note – you’ll want to double-check earnings dates across the board as that can obviously impact your trading strategy.
Another sector of the market that’s been strong lately is healthcare. And one of the strongest stocks in that bullish sector is MedPace Holdings (MEDP).
Admittedly, MEDP is coming out of a very bumpy consolidation and likely has earnings in a couple weeks. But it looks like the trend is higher and revenue growth in the underlying business appears to support it. With only 37-million shares outstanding this low-float idea could keep squeezing higher.
Now for our last pick, I want to share a current holding of mine that’s starting to perk up again. After a long sideways consolidation, I think TreeHouse Foods (THS) is worth a look.
This one reported earnings last week and based on the end of week performance I think the market liked what it saw. So I’m cautiously optimistic this stock can keep climbing back up from where it came.
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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