Free Trend Following Trade Ideas For November 2018 (Part 2):
No matter whether you’re a bull or a bear, this recent price action has been fascinating! The last quarter of 2018 sure is shaping up to be a dynamic one. So in this week’s update I’m eager to share my stock market outlook, and some specific charts of interest.
Okay, let’s briefly review what went down in the markets this past week, and then dive into some individual stock charts that are looking interesting.
November 2018 Stock Market Review and Outlook:
As I was saying, it’s been an interesting month in the market so far. And this week was no exception. Because after taking October off, bulls came back in a big way to push most US stock index prices above their 200-day moving averages.
But not to be outdone so easily, bears appeared Friday to try and swat prices lower once again. Although, buyers did show up at the close to push prices off their session lows.
So here’s the SPY daily chart to help you recap the tug of war that’s taken place the last 3 days:
Now with US stocks pinched between a 200-day and 50-day moving average, I think the next step could be a telling one. And the good news is…
The long-term picture looks a little better in my opinion. While I wouldn’t be surprised to see a more downside this week, the effort by bulls the last few days (in combination with the long-term uptrend) helps reassure me that a sideways trading range might be more likely than a complete washout.
Let’s zoom out to the weekly SPY view so you can see what I mean:
Despite October’s nasty selling, buyers have defended the lows of the year pretty effectively so far. But on the other hand, we’re still quite a distance away from the prior highs. And the end of week fade might be indicating sellers are waiting above to unload their shares.
All things considered though: A trading range scenario is still a better than a crash! So for me, it just means being more selective with entries, using smaller position sizes, and taking stop losses with no second guessing.
But I will keep taking by signals as I get them.
Now even though I’m slightly more constructive on US stocks, the rest of the world does give me some mild pause. For instance, after putting in a strong bounce two weeks ago, emerging markets have started to reverse and this downtrend looks to be reasserting itself once again…
At best, I think this asset class will need some time to move sideways and base out before it gets going on the upside again. At worst, the slide could accelerate. Furthermore…
European stocks look to be in a similar boat. Take a look at the weekly chart of VGK Wouldn’t you agree?
Beyond the technicals, I’m also starting to think about the stories of EU and Italian officials bumping heads over budgets. Just search Italy budget news to see what I mean…
It’s easy to imagine this narrative taking hold, and leading to another round of selling. So we might not be out of the woods yet if this overseas weakness weighs on US stocks.
In the meantime though, I’m also cognizant of missing out on upside. So with a healthy cash position, I’m looking for new ideas. And below are a few that have my interest.
Free Trend Following Trade Ideas For November (Part 2):
While I’m still taking entry signals in this market, because of the top-down weakness, I’m only buying 1 new position a day and keeping my position size smaller than usual.
I’m also hoping that with earnings season coming to an end, we’ll get a little bit less volatility and start to see some trends persist. So first up…
Take a look at the chart of NextEra Energy (NEE). It’s not the fastest mover but this kind of low-volatility grind up can be a nice ballast in your portfolio, especially when the rest of the market is chopping back-and-forth.
In particular, I like the way this stock held up during the October correction, and how it’s closed this most recent week at the highs.
Elsewhere in the energy patch, OGE Energy Corp (OGE) also has my attention. It’s like a cheaper and more volatile version of NEE…
So if you’re looking for a lower-priced stock at new highs, this one might be more within reach. Speaking of smaller cap trade ideas, I also want to point out Oriental Financial Group (OFG).
In my opinion, this is one of the better looking charts out there right now:
Of course in a sideways, volatile, or down-trending market, your breakout trades are often less likely to follow-through. So even with leading names, it’s best to be prudent with position sizes and stop losses.
Speaking of prudence…
One market sector that’s been acting well are the consumer staples. This defensive sector isn’t exactly the most exciting part of the market. But if you don’t want to go to cash, tactical trades in PG and CLX look like reasonable options to me here. Another similar idea is Johnson & Johnson (JNJ):
It’s encouraging to see JNJ back near all-time highs. And I zoomed out the chart a bit to try and show the broader backdrop, against which it’s easier to imagine the stock continuing to trend up. Of course nothing is guaranteed so a hard stop loss is always my go-to.
Now last but not least…
I want to point a big potential bottom in Tractor Supply Co (TSCO). Could this be the start of something big?
Even though TSCO has already moved quite a bit, the underlying operating trends in the business look like they can support it. So now that the stock is back at the highs, I think it’s possible it could keep trending.
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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