Free Trend Following Trade Ideas For December 2018 (Part 2):

 

Yikes! Talk about a dramatic week of trading in the markets! Actually, it was almost like 2 mini-weeks. And there sure was a lot of action.

Because after a strong start on Monday, bears quickly came out of the woodwork and made their presence known! 

So in this week’s edition of trend following trade ideas, I’ll share a little more about my big picture outlook, and then dig into some of the stronger charts out there right now.

Plus…

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Alright, let’s start with a quick look at the indexes, and then dive into individual stock charts.

December 2018 Stock Market Update:

Coming into December, bulls finally looked like they might have some initiative after two months of corrective price action. After all, the indexes finished November in the green.

And coming into Monday’s session – with something of a trade war truce on the table – it looked like bulls could finally charge higher out of the over-month-long choppy trading range we’ve found ourselves in.

But unfortunately for buyers, those early gains were short-lived. And by Friday’s close, the actively traded SPY ETF was threatening to crack the lower end of it’s trading range.

Here’s the daily chart to show you what I mean…

Free Trend Following Trade Ideas For December 2018 (Part 2) SPY daily

The thing that really stands out to me is not only how we’re below key moving averages; but also, just how volatile the recent trading action has been.

Compared to the last couple years (and even earlier this summer), the current market environment is moving much faster. For me it also means smaller position sizes because you’re more likely to have price gap through your stop loss.

The other thing that stands out to me is the relatively high volume on the down days recently, which probably isn’t a great sign either. But to help put this price action into perspective, let’s also take a look at the SPY weekly chart ETF

Free Trend Following Trade Ideas For December 2018 (Part 2) SPY

As you can see, while price is still pretty close to all-time highs, it looks like we’ll be going sideways for a while, at best. Because…

Now that price has been rejected a number of times when it moved up to that $280 level (including earlier this week), it looks like this is meaningful resistance.

And under the surface, higher-beta growth stocks are seeing some of the worst damage!

Tech and consumer discretionary stocks felt a lot of pressure, and small caps look like they might be ready for another leg lower…

Free Trend Following Trade Ideas For December 2018 (Part 2) IWM

To put it simply, the price action in US stocks isn’t encouraging much confidence for me right now. 

Meanwhile across the pond…

It’s not just the news flow out of France that’s pessimistic this week. European stocks continue to hit new lows, with some truly bearish price action this week.

Take a look at VGK to give you an idea…

Free Trend Following Trade Ideas For December 2018 (Part 2) VGK

So when you consider all these moving pieces, it looks like the path of least resistance (at least in the near term), might be lower. And it’s against this backdrop that I’m looking for leading trend following stock picks, which means smaller position sizes and no-questions-asked stop losses.

Trend Following Trade Ideas For December 2018 (Part 2):

To be honest, it’s slim pickings out there for breakout stock ideas right now. And with the market deep in correction mode, there’s less follow-through that we’ve seen over the last couple years.

But if you’re open to shorting stocks, there are some reasonable opportunities on the downside.

So first up, one of the stronger looking charts out there right now is Jernigan Capital (JCAP), which is coasting along nicely…

Free Trend Following Trade Ideas For December 2018 (Part 2) JCAP

There just aren’t that many stocks at 52-week highs right now. So the relative strength alone here gets my attention. And considering the chart isn’t too extended, I’m hoping this steady uptrend can continue.

Another stock that’s held up pretty well this past week is Trivago (TRVG). Even though I find the TV commercials pretty annoying, the stock chart doesn’t look too bad, in terms of a potential bottom:

Free Trend Following Trade Ideas For December 2018 (Part 2) TRVG

The challenge with this kind of chart set-up is, the breakouts can fail and end up chopping around in a bottoming pattern for months on end. So I always like to cut my losses quickly if charts like this don’t get going.

Alternatively…

A different approach to try and profit in this market is to watch those stocks that have consolidated and might be setting up again. Interactive Corp (IAC) looks kind of interesting in this regard:

Free Trend Following Trade Ideas For December 2018 (Part 2) IAC

The key for me here would be to wait for a bounce before jumping in (same ideas as with TRVG). Because considering how volatile and correlated stocks are lately, I’d want to see a little momentum come back into the market before taking a change on something that’s going sideways.

Another idea in this challenging market environment is to move to other asset classes. And one sector that’s looking up right now is precious metals.

An easy way to play this is with the Gold ETF (GLD).

Free Trend Following Trade Ideas For December 2018 (Part 2) GLD

Given that we’re heading towards the end of the year and that both stocks and bonds have underperformed, I think it’s reasonable to imagine more fund managers may rebalance into this space and keep this trend going into the end of the year.

Overall though, my market outlook is more cautious than it’s been for a while. Until we move out of this sideways range it’s hard to get too optimistic about breakouts. 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.

And plus…

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.

Speaking of…

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.

Learn How to Scan For 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 a +90-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.

See the Breakout Stock Blueprint!

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