It’s a new month, and time for another edition of weekly trend following stock picks. Even though it was a bit of a ho-hum week in the stock market, there are some intriguing rotations taking place from one sector to another.
In particular, the OPEC agreement this week pushed oil stocks to new highs, while favourite momentum tech stocks like Facebook and Amazon have been pulling back. Meanwhile, financials and industrials also look to be digesting their pushes to recent highs with minimal volatility.
If you’re having trouble getting your head around all this, don’t worry. The S&P-500 heat map from FinViz.com is a great way to get oriented with where the money is flowing.
The graph above shows 1-week performance, and you can clearly see that some sectors of the market did much better than others: while consumer, tech and drug stocks lagged, financial and materials surged.
And remember, while this backwards-looking view is helpful to get oriented, you’ll never know what happens next in the week ahead. So it always pays to be prepared for stock market opportunities..
With that in mind, let’s get down to business.
Trend Following Stock Picks for December 2016:
Heading into the end of the year tends to be a good time for bullish stock market investors. You can see for yourself: Seasonality data from EquityClock.com shows that December tends to be a positive time of year for a variety of asset classes and market sectors. With that wind at our back, let’s look at some specific trading ideas.
The first stock trading idea I have to share with you is MSG Networks (NYSE:MSGN). This consumer-facing sports entertainment company looks to be forming an uptrend. And after a few years of consolidation, these shares could continue to move back to previous highs, and maybe beyond.
I don’t currently own any shares of MSGN. But it’s definitely on my radar. I would look to buy on continued strength with a stop-loss order around $18.50
Next up on the list is an oil company. It wouldn’t be easy to get through this week’s edition of trend following picks without featuring one crude-related company. The stock that looks appealing to me right now is Schlumberger (NYSE:SLB).
This large cap oil services company is relatively established compared to some of the smaller-cap more speculative players. But I think if the change in price and sentiment around crude oil continues following this most recent OPEC agreement, shares of SLB could continue to run.
Again, I don’t have any exposure to this company just now, but the cart above shows how I’m planning my moves. I’ll look for continued strength and plan to build a position if the trade goes in my favour. Regarding stop-loss placement: I’d be willing to give this one a little more wiggle room, but if it falls back into the lower end of the trading range I don’t want to stick around.
While there is definitely a risk of whipsaw, given the nascent nature of the trend, if you catch these changes in momentum early the moves can be long-lasting and extremely profitable. Another oil stock that I continue to be long is HCLP. I first analyzed this stock on Seeking Alpha in June, indicating that fundamentals and technicals supported potential higher prices. I then featured it again as an October stock pick, and continue to be long this premium provider of frac-sand with a cost-basis of around $13.
Moving away from the oil patch for a moment, I also want to share a potential small-cap stock pick. Now let me warn you, this is a pretty volatile company and if the trade goes against me I won’t stick around to have my money tied up. On the other hand…
I think magicJack VocalTel Ltd (NASDAQ:CALL) could be setting up for a quick move. From a fundamental perspective, the company is swimming in cash, has recurring revenue from customers on contract, and the valuation is as cheap as it gets.
For these reasons, I think CALL is worth a small speculative position with a relatively tight stop of $6.59 or so. That said, since this stock is very volatile I would only have my stop loss trigger on a closing basis. I already own shares of CALL but will continue to buy more if price keeps heading in the right direction
Finally, I want to share one particular stock pick for my Canadian readers. Badger Daylighting Ltd (TSE:BAD) has been particularly strong and I would be remiss if I didn’t mention it. I picked up shares this week with a cost basis of $31.26, and will continue to add on strength.
One of the reasons I like this set-up is because I’m always encouraged when stocks can close at weekly highs with all of the moving averages are sloping up. This could be a good sign of a sustainable long-term trend.
And since I’m playing for a breakout, I’ve put the stop-loss order around $28.90. This way, if the recent strength reverses I won’t be waiting around if things fizzle out.
So there you have it. Those are the stocks I’m watching heading into the first full trading week of December 2016. If seasonality is any guide, then it pays to be ready to put money to work in the final month of 2016. This is your last chance to meet your goals for the year.
And by the way, if you liked these ideas and you want to see what I’ll be trading next week, then just click here to sign up to be alerted of any new stock picks. I’ll always provide you with at least 3 of my best trade ideas every week. Plus, they always include actionable stop-losses to help you manage risk and determine when it’s time to move on.