Free Trend Following Trade Ideas – November (Part 3):
It’s been eight weeks since the S&P-500 made an all-time high. And while we’re technically out of correction territory, the index is still about 7% below the high watermark. So…
In this weekend’s edition of trend following stock trade ideas I’m hoping to take a closer look to see if a recovery rally might be around the corner, and which stocks could be poised to benefit.
Now, let’s quickly recap the trading action of the past week, and then take a closer look at some individual stock charts that look like they might have breakout potential.
November 2018 Stock Market Analysis:
I think the best way to sum up the recent trading action is: tug of war. Because the daily volatility has been much higher than we saw last quarter, indicating a violent and ongoing disagreement between bulls and bears.
And even though buyers were able to bid prices off the lows of the week, the intraday price swings were pretty intense. We also still ended the week lower on all the major stock indexes. So as a proxy, here’s a weekly chart of the SPY ETF,
The thing that stands out to me here is the way the long-term uptrend still looks to be intact. Sure, momentum has really slowed down, and price might be pinned in a trading range. But for now, buyers have done the bare minimum to defend this trend.
One potential tailwind heading into the end of the year is seasonality. As you can see from the Equity Clock chart below, SPY tends to perform strongly headed into the end of the year…
Of course, past performance is no guarantee of future results. But this 20-year trend is pretty compelling. So let’s see if it can help bail out bulls in the coming weeks.
Another area of interest for me all of a sudden is emerging markets. Because while these stocks have been in a brutal downtrend all year, it’s finally starting to slow.
I think it’s feasible EEM could benefit from some capital rotation into the end of the year, as investors rebalance back to their target allocations. And there’s a chance that buying could provide some much-needed love for stocks globally. So this is another piece of the puzzle I’ll be watching into the end of the year.
Now on the other hand…
We aren’t out of the woods yet either. And one of my biggest concerns is the way some market sectors have run into potential resistance, after bouncing from oversold conditions.
For instance, take a look at the industrials, which have rallied right into the prior trading range, and now might face some selling pressure…
Material stocks have a similar look, although the initial breakdown was even more pronounced…
Finally take a look at financials too. They’ve actually made a little more progress than I initially expected, but it still could be tough going if underwater sellers unload their shares when they get back to even.
To make matters worse, the strongest sectors this week were utilities and consumer staples, not exactly risk on! Especially considering how tech and consumer discretionary stocks continued to lag.
But I guess the good news is, there are still some stocks setting up under the surface. And with earnings season mostly out of the way, we may have the all-clear to trend up into the end of the year.
That said, considering the high volatility and index prices pinned below the 200-day moving average, I’m careful to keep position sizes small and always have a stop-loss strategy.
Now, let’s dive into some specific charts…
November 2018 Trend Following Breakout Trade Ideas (Part 3):
If you missed part 1 and 2 this month, you can always go back and see past weekend stock ideas here. But as we head into the end of the year, I do want to provide some fresh ideas that might have the potential to trend…
So first up, I want to show you the chart of Atmos Energy (ATO). This one has been trending strongly throughout the recent market turbulence. And this relative strength has my attention…
Now in this choppy market environment, it’s more likely that breakouts will fail and falter. But so far this one has been able to buck the trend.
Another strong looking chart is CME Group (CME), which continues to hit new highs.
Plus, CME is benefiting from some top-down strength as other related stocks are also acting quite well. So if big institutional money is flowing into this space, I’m cautiously optimistic it can keep trending.
Next up I want to show you the chart of New Jersey Resources (NJR). It’s one of the cleaner breakouts this week, and with any luck it will be able to keep moving up…
Please do double-check earnings on this one, as I think they have yet to report Q3 results. But it looks like the market might be expecting good news.
Alright, last up I want to point out the chart of Simply Good Foods Company (SMPL). It’s a lower-priced idea that spent this week consolidating at all-time highs.
Now I know it does appear a little choppy. But with earnings out of the way and the market seeming to have digested the results, this young company with shares in blue-sky territory could continue to trend, couldn’t it?
Coming out of corrections, I tend to look for company that have held up well during the bouts of market turbulence. So if you’re looking for more ideas this week consider buying the dip in stocks that are just below all-time highs.
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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