Trend Following Trade Ideas for August 2017 Part 1:
Can you believe it? Summer 2017 is already more than halfway done! But there’s been no shortage of opportunity in the stock market.And these free trend following trade ideas are sure to help you this August.
For me personally…
July was a pretty hectic month. There were weddings, family gatherings and even a camping trip. It was fun, don’t get me wrong.
But it was also a bit of a whirlwind!
While I’m happy to be making the most of summer, it felt good to be back in the saddle this week and able to watch the market on a more consistent basis.
And hopefully, that also means a better weekly update for you!
Let’s quickly recap the action in the markets this week, and then look ahead to some breakout stocks that look like they could trend higher next week. Sound good?
Trend Following Recap For the First Week of August 2017:
To put it bluntly: the bull market continues to run! This week, it was the Dow Jones Industrial Averages’ turn to lead the way.
Strong earnings results from a number of DJIA components led the index into blue sky territory. If you ask me, the weekly chart is pretty compelling:
Not bad, right? Of course…
Bears will argue the Dow only represents a handful of stocks, and isn’t representative of the overall market.
… So who’s right?
Well, I’m just another interested observer. But data from FinViz reinforces what we’re seeing in the charts of different indexes and market sectors.
Healthcare is pausing a little bit after an 11% performance over the last 6 months. Meanwhile financials and conglomerates are taking the lead.
In particular, I think the XLF financial sector ETF is looking quite strong. And it could easily keep running, if you ask me:
I actually picked up a bank stock Friday afternoon. So I’ll share that specific idea below.
But for now… just keep in mind…
This kind of top-down-trading, as shown in the broad financial sector strength, is one of the reasons I feel a little more confident investing in bank stocks.
Another thing that’s caught my eye recently is the price action in oil. Here’s the weekly chart of the price of Brent Crude:
As you can see, oil’s held support, and put in a doji candle after a strong performance in the week prior. The chart of WTI looks much the same as Brent.
And in particular…
I’ll be watching to see if oil continues higher from here, or puts in another lower high and keeps rolling over.
Plus for those Canadian readers of mine, it might also add some colour to the dramatic USDCAD situation.
But back to market breadth for a second…
Is The Stock Market Weak Under The Hood?
Despite the headline index strength, I saw a number of articles this week claiming stocks were weak under the surface. In particular, small cap stocks have sold off quite a bit since their high last week.
To make matters worse…
With earnings season in play right now, there are no shortage of stocks taking +10% losses overnight. And I know this can add to the volatility and fuel sound bites like “15% of stocks are 20% below their highs.”
… So what did I do?
I checked on of my favourite breadth measures, the NYSE cumulative advance-decline line. And much to my surprise… well… things looked pretty good!
Until this starts putting in lower highs, I’ll continue my bullish tone, while being pretty much fully invested.
And just to clarify…
The only reason I’m not fully invested is because I had a stop trigger in CHD at Friday’s close, for a small loss. Here’s what that looked like:
As I mentioned, obviously earnings season can be volatile. And it’s frustrating to get stopped out like this. But…
If you want to have big winners that are really going to move the needle, you’re going to learn quickly how the volatility can cut both ways.
“To have stocks that run for quarters on end, you need to give them some wiggle room!”
Since I have a plan for when to sell <link>, and alwayys manage my position size carefully, even a big earnings gap down won’t be TOO detrimental.
It can still be annoying though!
Nonetheless, I like to think of losses as a chance to rotate capital. This little brain hack helps me get out of my own way.
It also dampens the frustration of losses, and keeps me focused on finding opportunity.
Enough with this market analysis, let’s get down to the business of this week’s trend following trading ideas…
Free Trend Following Trade Ideas for August 2017 – Part 1:
Although there’s no shortage of doom and gloom in the news media, I’m still seeing a fair number of stock picks setting up.
The field is a little bit slimmer than it has been, because stocks are quite extended. So below are a few of my favourite set-ups that I’m seeing from the stock screens<link> this week:
The first stock to share is Chubb Insurance Corporation. In my opinion, the whole insurance space looks pretty good right now, with the KIE insurance sector ETF hitting new highs for the past couple weeks.
But while many of the stocks are quite extended, shares of CB are breaking out from a longer-term base:
I don’t always take these kind of consolidation patterns into account – I’m happy buying aggressive breakouts too – but a lot of charts are looking stretched these days, so I’m trying to focus a little more on fresher opportunities.
By the way…
Another way you can try to do this a little bit more systematically is just to eliminate stocks that are 40-50% or more above their 200-day or even 50-day moving average (depending in your trading timeframe).
This can naturally help you stay focused on stocks that are just breaking out of consolidation patterns, even if you aren’t an expert chart reader.
Now up next…
Shares of the Essent Group have caught my eye. This housing finance company is peaking it’s head out of a consolidation:
At the risk of going overboard on financials…
Here’s how I’m managing that new position:
To be honest, I’m actually a few pennies in the red on this one. So if you were to buy Monday at the open you might even be able to get a lower cost basis for me (not that it’s a recommendation!)
Do you remember the strength in conglomerate stocks this week?
I mentioned it at the start of this article. And one of the larger-cap names in the space that has my eye is HoneyWell.
This is a favourite of mine and while I don’t currently have a position I’m certainly curious to get some exposure.
And after seeing the breakout taking place, you might be too:
In case you don’t remember, I last wrote about HON in February 2017 (here). I know it can be hard to buy a stock that’s already gone up so much. But…
“With any luck there’s still lots more UP to go!”
Plus, as I mentioned, the broader sector strength in these large cap conglomerate stocks will hopefully put a little more momentum in their sails.
Now… there’s one more part of the market I want to talk about… China!
To be honest…
I historically have shied away from trading Chinese stocks – I was wary of the accounting numbers, and pretty out of touch with the market. And I’m still not an expert by any means.
But you know what?
The great thing about trend following trading strategies is that it’s easy to manage risk and participate in the upside, without too much downside risk.
So with this kind of strategy, I’m more comfortable trading Chinese stocks. Plus…
I’m currently holding some great winners in Ali Baba (BABA) and Baozun (BZUN), thus I’m feeling a little bit emboldened buying these foreign-based stocks.
And that’s why I wanted to point out the chart of Weibo, a Chinese social media giant:
As you can see, the stock is back near the highs, and could be getting ready to make another move higher. However…
Be warned that this one does have earnings coming up next week. So personally… in this case… I’d probably either keep my position smaller than normal, or plan to jump in assuming a breakout after the announcement.
Truthfully, earnings season always complicates trading decisions a little bit and how you deal with it best will probably depend on your personal trading timeframe and risk tolerance.
Now before we wrap this up, there’s one more thing I want to show you.
My Current Trend Following Trading Portfolio – August 2017:
In case the ideas above aren’t enough for you, I also want to share my current portfolio holdings. My hope is…
This will give you a better idea of not only what stocks I’m buying, but also which stocks I’m holding.
I’ve imported my trading portfolio into a FinViz stock screen, and then displayed the results in chart format.
This way you can very easily see at a glance exactly what kind of stocks I’m owning. The one exception are a few Canadian stocks that FinViz doesn’t support, (WJA.TO, PBH.TO, RY.TO and a few others but they aren’t major positions).
You should notice stocks like HEI and FOXF, breaking out to new highs… as well as..healthcare and tech stocks that are consolidating below their recent highs.
By being ready with both immediately actionable ideas and a short list of potential breakouts across a variety of sectors, you can be ready to make the most of any potential breakouts!
Sound good? Great.
Now, if you want to learn how to find stock picks and trading ideas like this for yourself, 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.