Free Trend Following Trade Ideas For January 2019 (Part 1):
Wow! Talk about a wild start to the year. We haven’t even had a full trading week yet in 2019. But there sure has been a ton of action! So let’s recap what’s happening in the current market environment and then look at some stocks that might finally be ready to bust a move.
Now, let’s quickly recap where the stock market stands as we kick off 2019.
January 2019 Stock Market Recap:
Coming into 2019, it felt like bulls were really on the hind foot. Because despite an invigorated end-of-year bounce, the stock market had a horrible December. So the stakes were high.
And yet the price action sure hasn’t disappointed one bit! It’s been a volatile back-and-forth the last few days. So the easiest way to sum it up for you is probably with a daily chart of SPY, the actively traded ETF for the S&P-500.
After bottoming out on Christmas eve, stocks have rebounded in a very impressive manner. But coming into Friday’s trading session, I thought there was a serious risk of prices rolling over and confirming a lower high. Evidently, that was not the case!
Even more impressive: buyers were able to push prices higher throughout the entire trading day, from start to finish. And pretty much all market sectors participated, as you can see from the FinViz chart below:
So at a glance, this bullish price action is pretty encouraging. And in the short-term, I think more upside is certainly possible.
Plus in my opinion, aside from some weakness in housing, a lot of the underlying macroeconomic indicators (like retail sales, for example) are still trending higher. That said…
I’m still quite concerned about the bigger technical picture. After all, in the SPY chart above you can see price is still well below key moving averages, which makes me give bears the benefit of the doubt.
And when you zoom out to the weekly chart timeframe, things don’t look quite as good. While SPY isn’t the entire market, it’s a reasonable litmus test and conveys the point that there’s significant overhead supply above:
Even though we bounced hard to start the year, and even though the bounce could continue higher, there’s still technical damage that will most likely take time to recover. Bolstering my concerns is the fact that this trend isn’t just showing up in US markets.
You can see the same pattern happening on the All-Country World Index (ACWI):
Overall then, I think the evidence is pretty clear. But what you do with it depends on your personal timeframe, risk tolerance, and trading preferences. For example…
Tactical short-term swing traders might really be able to capitalize on this current burst of momentum. But on the other hand, position traders who’ve moved to the sideline weeks or months ago might need to see more evidence before re-entering.
So with that in mind, let’s drill down to some specific stock charts that are showing promise…
Free Trend Following Trade Ideas For January 2019 (Part 1):
Now personally, I’m still sitting largely in cash right now. But with the strong bullish price action this week, I’m starting to see some setups that look appealing.
One challenge though is that while a lot of stocks are bouncing, they’re still in severe downtrends on their long-term weekly charts. So for my timeframe, I still need a little more evidence.
But one chart that’s showing relative strength right now is Netflix. The strong daily chart bounce to end the week really helped differentiate this one from the pack.
After catching an upgrade before the opening bell Friday, NFLX managed to break out of it’s prior trading range and is now surging past the 50-day moving average. Given this is a popular momentum stock, I’m optimistic it can keep moving with the overall market
Now another tech stock that’s hitting highs right now is VMWare (VMW). This is one of the few stocks still in something of an uptrend right now:
If we see continued upside next week, I think this one might be able to keep coasting into blue sky territory with overhead resistance out of the way.
Outside of the US, one of the markets that’s looking best to me right now is Brazil. And one of the best looking stock charts down there is Banco Santander (BSBR). You can see from the weekly chart below this one is really breaking out:
My hope here is that BSBR can benefit from the top-down strength of Brazilian stocks generally. This asset-class momentum could be a tailwind.
Alright, last but not least, I also wanted to share a lower-priced stock idea as I know that’s what some of you prefer. Now as is often the case with these types of stocks, I don’t love the fundamentals. But…
The chart of Inssego (INSG) is really blasting off so I thought it worth sharing:
Not only is the stock moving higher out of a multi-month consolidation, but it did so on big buy volume too. So I’m a little more optimistic this can keep moving.
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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