November 2019 Weekly Trend Following Market Update + Ideas (Part 4):
It’s almost Thanksgiving, which marks the start of the holiday season. And as the end of 2019 inches closer, it looks like the stock market might already be on vacation! (At least given how stock prices paused last week)
But in fact, this rest might be overdue after a strong start to the final quarter of the year. So in this weekend update I’m eager to recap what’s working and where we might go from here. Plus I have another potential trade idea to share, in case you’re looking for a swing or position trade.
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Now as usual, let’s recap the headline index action before digging into individual ideas. This should help put the recent pullback in context, for starters.
November 2019 Stock Market Update (Part 4):
As I was saying, SPY pulled back after 6 straight weeks higher. And the good news is, even though we did see a red candle last week, prices closed much closer to the highs than the lows. So it wasn’t a washout by any means.
Here’s the weekly chart from TrendSpider so you can see for yourself how this pullback looks to be a pause in a longer uptrend…
All in all, I think this is constructive price action. After all, stocks can’t go up every day. So this close-off-the-lows was a positive print to end the week, – indicating buyers hadn’t completely given up when faced with a little selling pressure.
That said, the pullback last week was not specific to the S&P-500. Large cap tech stocks (QQQ), emerging markets (EEM) and European indexes (VGK) all closed lower. One way I like to summarize all of this is with the All-Country World Index (ACWI). I
t’s a quick and easy way to see what’s going on:
Interestingly, ACWI has been consolidating below all-time highs. And to the extent it keeps knocking on this door, it might just break through.
There’s one other trend to keep in mind right too. Because…
Heading into the end of the year, buyers do seem to have the seasonality winds at their backs (…at least, based on previous years). Of course, past performance doesn’t guarantee future success. But this chart from EquityClock is pretty compelling:
If this year looks like the average, then it should be smooth sailing the next couple weeks as buyers step in towards the Thanksgiving weekend. And if the broad market can keep trending up, then individual stock breakouts should fare well too.
Speaking of, let me show you a closer look at one stock currently in my portfolio, which is once again flashing some signs of momentum.
Trend Following Trade Idea For November 2019 – Part 4:
I’ve owned shares of Ansys Inc (ANSS) for a few months now, and I originally shared the chart with readers back in October. But since then, the stock has only gotten stronger and stronger. In case you aren’t familiar, the company is a leader in using simulation software to help companies reduce manufacturing and assembly-line costs.
Now for the most recent look at the price action of ANSS, check out the weekly chart from TrendSpider. Notwithstanding the longterm uptrend, it looks like the most recent pop was driven by a new key partnership.
Hopefully this fundamental catalyst leads to more uptrends ahead….
As you can see, ANSS had been bumping along for quite a long time now. But only recently has the stock really got moving.
Personally, I’m happy holding shares, and this chart is now flashing me a fresh entry signal too. I like to keep my risk under 1% of portfolio, with a stop at $223.50, which I plan to trail higher at the end of each week.
If you’re a shorter-term swing trader, you may want to add ANSS to your watchlist and wait for a pullback to buy. On the other hand if you’re a longer-term position trader using weekly charts, I’d have no problem buying this momentum.
One reason I’m a little more confident this uptrend can continue is because of the strong financial trends you can see in their annual reports. Here’s a long-term view of the financials (free from Morningstar) to show you what I mean:
Now there’s a lot to unpack here. But by looking at how these numbers trend over time you can get a sense of some key details:
- Revenue hasn’t been the fastest growing, but it’s continued to grind higher consistently indicating steady demand. The new partnership I mentioned above might help this keep moving up.
- Operating Margin % has remained strong and consistent during all these years. That means most of the sales growth has fallen to the bottom line, as seen by growing earnings per share.
- The company has shares outstanding of under 90 million, and this number has been falling. So those who do hold shares in the company get a growing piece of this growing pie. What’s not to like about that?
Meanwhile, over on FinViz you can see analysts have been pretty positive of ANSS. Hopefully continued fundamental execution will result in these price targets being lifted over time. This kind of institutional support can also keep the trends moving, in my experience.
And in any case, as long as you have a plan for when to sell, I think these kind of trades can present appealing risk/reward. By combining fundamental insights and a technical trading plan, you can find high-quality ideas and manage your risk/reward consistently.
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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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…
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