Free Trend Following Trade Ideas For August 2019 (Part 2):
The volatility continues! It was another dynamic week in the market, with the back-and-forth between bulls and bears reaching extreme levels. So as usual, I’m keen to recap the action in the indexes and then share some individual stock charts that appear to be showing promise.
Now as I was saying, there was a lot of action this week so let’s begin with the big picture before looking at some stand-out stocks showing relative strength. Because with earnings season winding down but a trade-war heating up, there sure is a lot to discuss!
August 2019 – Stock Market Recap:
Trading in August started off with a mean lean to the downside. And by the end of last Monday’s trading session, it looked like bulls might never regain control of the tape. But you know what makes the markets interesting?
Just as sellers looked to be at their strongest, dip-buyers stepped in and actually pushed prices all the way back to near even for the week. It really was a roller-coaster! One easy way to really see this changing market condition, is via the increase in short-term volatility compared to a longer-term average.
Specifically, take a look at the jump in the 8-day Average True Range recently in the bottom pane of the chart below:
And notably, not only has the short-term 8-day ATR spiked recently; but, I’ve also added in a longer-term 240-day ATR to give you an idea of the average volatility in SPY over the last year.
Now personally, I think this context is helpful because it illustrates the volatility right now is quite a bit higher than the average we’ve seen this year. So in the weeks ahead, I’ll be watching closely to see if that short-term ATR starts trending down again. In the meantime though, I think a little more caution is warranted.
Because while dip-buyers could keep a bounce running here (as looks to be the case with QQQ), there are still some warning signs on the horizon.
For instance, keep an eye on how bonds are acting too. The TLT ETF weekly chart is a good place to start:
Right now, it looks like momentum is really rallying here. But I suppose there is some risk this is a blow-off top in the making. After all, TLT has already covered a lot of ground very quickly. Maybe this move in bonds is overdone?
All-in-all though, I think the most likely case for global equities might be more sideways back-and-forth. As a point-in-case, the ETF for the All-Country World Index is firmly back in it’s 18-month trading range below the January 2018 highs:
While this isn’t ideal for trend-followers, because many stocks follow the index performance (or lack thereof), there are still a few individual stocks that are standing out.
Let me show you what I mean…
Free Trend Following Trade Ideas For August 2019 (Part 2):
One of the things that has me encouraged about the current market environment is how many stocks are still holding near 52-week highs, after reporting their recent earnings.
My hope for this group of companies is the fundamental operating results can help the stock prices keep trending higher, even if the top-down market environment isn’t accommodating. So first up…
I want to flag Chipotle Mexican Grill (CMG), which recently reported 10% same-store sales growth and continues to trend up after putting in what now looks like a major long-term bottom:
Along a similar note, Career Education Corp (CECO) is also coming off a strong earnings beat and has a stock that’s popping to new multi-year highs.
Now to be fair though, I appreciate these kind of stocks can be hard to buy since it feels like you might have already missed the move. But the whole point of momentum is that an object in motion can tend to stay in motion – especially when spurred by impressive underlying results!
Digital Turbine (APPS) reported a strong quarter last week, and the stock is performing just as you’d hope. With fundamentals and technicals trending in the right direction, I’m hoping this one can keep moving.
Now last but not least, America’s Car-Mart (CRMT) hasn’t reported earnings yet – likely coming up in the next week or two – but the 50-day high coming out of a few weeks of consolidation looks appealing to me.
Personally, I do usually like to buy 52-week highs. But in the interest of catching fresher trends with more potential upside, these 50-day signals can prove to be useful entry criteria.
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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