Free Trend Following Trade Ideas For June 2019 (Part 1):
Even though it was a short week in the stock market, there was no shortage of action! And heading into Monday’s trading session, it looks like bears are the ones with the initiative right now. So I’m eager to recap a few key index charts to catch you up on the big picture, before sharing some of the individual stocks that are holding up better than the rest.
Now before we get into specific stock ideas, let’s take a step back at the broader landscape. Because while the first quarter of 2019 got off to an explosive start, things have really started to cool down the last few weeks. So it’s fair to wonder if this is the start of a deeper freeze or just a temporary pause.
June 2019 Stock Market Overview and Analysis:
S&P-500 Finishes the Week at Lows:
Let’s cut to the chase here: The major S&P-500 index just finished it’s fourth week in a row lower. Ouch! And to make matters worse, it’s been a volatile and fast-moving few weeks too, with big percentage swings lower. It’s not been an environment conducive to swing trading breakouts.
So here’s a look at the SPY ETF weekly chart to give you a sense of how this selling is starting to add up:
Zooming into the daily chart, you can see SPY is clearly in a short-term downtrend. And the question for the days ahead will be whether or not we see a significant bounce at the 200-day MAY.
And what’s also notable here is how it’s not just the large-cap stocks getting hit. In fact, I think there’s a compelling case to be made that small caps are actually even worse off (at least from a technical perspective!)
Here’s the Russell 2000 ETF, IWM, to give you a sense of what I’m talking about:
So for now, it appears to me that sellers have the short-term momentum. Prices have been sliding down steadily, and until we see some signs of stability it’s hard for me to get excited about buying in on the long side.
And as I’ve mentioned in the past few weekend updates, it’s not just US stocks feeling the heat.
Global Stocks Still Struggling:
One of the indexes I like to keep tabs on is the All-Country World Index, as shown via the ACWI ETF. This basket of stocks represents most major market indexes and gives a sense of how investors around the world are feeling about equites. Unfortunately, the current mood appears to be a little dour.
With stocks stuck in this sideways trading range, I’m less optimistic breakouts are going to follow through. Instead, it’s hard to feel exuberantly bullish. And in fact, patience is probably will be what pays here.
Now one potential bright spot worth mentioning is emerging markets, which actually held up relatively well last week.
Emerging Markets Ready To Shine?
With US and European stocks getting sold across the board, it’s interesting to see that emerging markets were actually higher last week. Here’s the EEM chart so you can see for yourself…
So if bulls are going to have any chance this week, I’d expect to see a continued bounce from the lows in these emerging market stocks. More sideways action or a retest of the lows would be further cause for concern and would further weigh on ACWI.
Speaking of retests, let me show you a few other leading sectors I’m watching to determine if this pullback is the start of something more serious.
Can Leading Tech Growth Stocks Get Moving?
When markets are pulling back, one of the things I like to do is keep an eye on the leading sectors of the market to see how they’re acting. After all, if the growth stocks are struggling, it’s reasonable to assume momentum breakouts are more likely to fizzle.
So in particular, I’ll be watching to see if the cloud computing ETF, SKYY, ends up finding some support soon:
This has been a hot pocket of momentum for the last couple of years. And I’m curious if this trend is running out of steam, or just resting before it continues its relentless rise higher. On the other hand…
If buyers don’t step in and prop up prices soon, things could unwind in a hurry. It feels like a lot of bulls have been trying to hide out in these strong growth names… so… hopefully everyone doesn’t run for the exits at once!
On that note, the action in semiconductor stocks (as shown via SMH), is still pretty concerning to me too.
Without a bounce here soon, a further breakdown could cast doubt on the broader market. After all, there are lots of fundamental reasons to worry as the China-US trade war escalates- and yet bull markets climb a wall of worry too. But I’m keeping my eye on the semiconductors for clues.
Now all that to say…
I’m not exactly optimistic about the current market environment. I’ll share some trade ideas below; but remember, keep position sizes small, have a plan for when to sell, and consider staying in cash until the short-term storm clears.
Stock Trading Ideas For June 2019 (Part 1):
With the market pulling back, I think it makes sense to start things off with some potential dip-buying ideas. And while I’m hoping these stocks will bounce, keep in mind that if the market continues to draw down, then even oversold stocks can keep falling.
Dip-Buying Trade Ideas for June 2019 (Part 1):
With that in mind, let’s first take a look at Illinois Tool Works (ITW). Not only is the chart down significantly from its highs; but, the stock has also already started to bounce off the lows a little bit.
Personally, I don’t like to be the first one trying to catch a falling knife, so it’s nice to see that ITW already has some buyers stepping in to push prices off the lows.
And actually, the same can be said for the chart of Ford (F). The stock has fallen quite a bit, spurred on at the end of the week by tariffs on Mexico last week. So now after coming back to support, you can see the recent hammer candle stick might be the start of a short-term bounce…
Plus, if the broad market cooperates here, these stocks could bounce in a more meaningful way. But that’s by no means guaranteed.
That said, if upside momentum does return to the market it can pay to be prepared. So below are some other stocks that may be setting up for another leg higher.
Trend Following Trade Ideas for June 2019 (Part 1):
There aren’t a lot of stocks making fresh new highs right now. But one of the few charts that’s charging ahead is Endava (DAVA). It’s a relatively recent IPO that’s been heading higher week after week.
To be sure, this company lacks a track record so I’d keep my position size small. But with a small float and no overhead supply, it could be worth consideration for a continued quick move up. The relative strength is rather impressive, if you ask me.
Another approach in these types of markets is simply to build a watchlist and either buy the dips, or wait for a breakout. One such example on my radar right now is EcoLab Inc (ECL).
The stock has been trading in a range near highs and looks like it might be getting ready for another leg up:
While the rest of the market has been coming under pressure, this stock remains a stalwart. And maybe that’s saying something about the potential for more upside ahead.
A somewhat similar chart to keep an eye on is Hamilton Lane (HLNE). This stock has been slowly pulling back the last few weeks and could be getting ready to pop…
With any luck, support here will come into play and this current area could prove to be a low-risk entry.
Last but not least, the chart of Tetra Tech (TTEK) also has my attention. It’s been trading in a tight range lately, near 52-week highs highs.
Again, this one has been consolidating well and I like the way it’s been able to hold steady this week when the market as a whole has fallen lower.
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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