Free Trend Following Trade Ideas For August 2019 (Part 1):
Talk about a dynamic start to August! Because heading into the back half of the summer months, SPY has given back all of the July gains in the last two trading days!
So in today’s market update, I’m eager to take a closer look at this pullback to try and determine whether it’s a dip worth buying… OR, if more caution is warranted. I’ll also point out a couple of individual stock charts that appear to be holding up well.
So to start things off, let’s quickly recap the action in the major stock indexes last week. Because as you might know, the selling was a little bit alarming, especially since it followed an interest rate cut!
What does it all mean? Let’s discuss….
August 2019 Stock Market Outlook:
As I was saying, we’ve only had two trading days in August so far. But bears have already recaptured all of the July gains! I guess the good news is, prices did close somewhat off their lows of the week. But this may have also just been intraday short covering.
You can see this pretty clearly on the SPY daily chart, here:
More specifically: The S&P-500 and Nasdaq had their worst weeks’ of the year – down 3.1% and 3.9% respectively (while the Dow did slightly better, losing only 2.6%).
You can also see how this manifests on the weekly chart. The big red candle implies volatility did pick up into the end of the month.
Meanwhile outside US markets, things weren’t much better. European stocks were summarily smacked down, and emerging markets – as shown below via EEM – have also given up months of gains all at once:
So as you’d expect in this kind of pullback, defensive sectors like utilities and REITs held up pretty well, while treasuries continued to get bid higher (and thus push bond yields lower).
Here’s the chart of the TLT ETF to help show you the strength of this surge in bonds:
At the same time, gold is also continuing to gain steam – a further indication of risk-off behaviour in the current tape.
Looking ahead then, I’ll be curious to see if this ends up being a buy-the-dip opportunity or the start of something more severe. For now though, let’s take a closer look at what is working as August starts to unfold.
Free Trend Following Trade Ideas For August 2019 – Part 1:
Given the BIG pullback to start the month, there aren’t a ton of breakout trade ideas to highlight this week. And the ones that are popping up tend to be in defensive sectors like REITs and utilities.
In any case though, let me show you what’s popping up on my radar this morning. First up is Public Storage (PSA), which finished the week near highs and looks like it might be almost ready for another leg higher:
I’ll be watching closely to see if this one can follow-through in the week ahead. On a related note, I also want to share the daily chart of Floor & Decor Holdings (FND).
While I usually like to focus on 52-week highs, in this case we’re looking at a 50-day breakout on the daily chart. But based on this strong candle in a weak tape, I’ve got it on my watchlist for follow-through higher.
Now the last two ideas I want to show you today are two power companies – which are trending strongly along with the utility sector generally. The first is Algonquin Power & Utilities Corp (AQN), which continues to make trend following look easy.
In addition to the uptrend, AQN also throws off a healthy dividend, which can help enhance your total return.
Along the same lines, TerraForm Power (TERP) is also bumping and grinding higher. In a soft tape, these pockets of relative strength might be able to keep holding up.
Overall though, my expectations are relatively muted going into this upcoming trading week. Despite a reasonably strong earnings season so far, this recent pullback has me a little more cautious in the short-term and I’ll be watching whether the downside continues.
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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