Trend Following Trade Ideas For December 2016:
Welcome to the final full trading week of December 2016. Below are some of my favourite stock picks for next week.
I hope these trend-following trade ideas can help you finish your investing year with a bang!
But before we get started, let me give you some context. Because with the Fed raising interest rates and planning to hike 3 more times in 2017, some investors are feeling a little on edge.
And in fact…
While the market rallied to all-time highs ahead of the FOMC meeting on Wednesday, stocks sold-off after the Fed announcement and ended the week flat.
This chart from Doug Short tells the story.
Additionally, data FinViz.com shows how the different sectors of the market performed over the last week.
Take a look for yourself:
You can see that the sectors which have been performing best over the last few months, pulled back a little. And the recently beleagured Healthcare and Utility sectors outperformed.
To be honest…
In the short term, financials, industrials and conglomerates had become very stretched to the upside. It makes sense they would be ready for a pause.
Finally, take a look at December seasonality data from the good folks at EquityClock.com.
You can see, the middle of the month tends to be a bit soft. But if we’re lucky and past is precedent, bulls could get a final push into the end of the year.
It’s hard to trade on seasonality data if you ask me, but it’s nice to know there’s a potential tailwind helping your trades. This is especially true when the stock maket overall is in a major uptrend, which seems to currently be the case.
Now with that backdrop in mind, let’s look at some potential trend following trade ideas for the week ahead…
Trend Following Trade Ideas For December 2016:
Although the stock market hit an all-time high this week, by Friday’s close it had pulled back. Nonetheless, there were some great trend following stock picks presenting themselves. Take a look…
So first up on the list is an idea we featured last week that continues to steamroll ahead: Tessera Holding Corp (NASDAQ:TSRA). Here’s the most recent chart.
And as a reminder, here’s the chart I showed you last week:
As long as you are careful with your position size and risk management, I don’t think it’s too late to add to your position here. Why shouldn’t this stock keep going up?
Another promising potential stock pick is Ross Stores (NASDAQ:ROST). The stock is one of relative few to finish the week at highs, which makes it appealing.
And if you zoom in on the daiy chart, you can see some particularly impressive buy-volume to end the week:
So that’s how I would play an entry in ROST, though I’m already long shares from $58 earlier in the summer.
Next up is a stock that’s been on an absolute roller coaster.
But unlike the real world, what goes up in the stock market doesn’t necessarily have to come down! A good example of this is Invidia Corp (NASDAQ:NVDA).
NVDA might be familiar. I’ve mentioned it on the blog before, and since I first recomended NVDA on Twitter, the stock is up over 300%!
The truth is, even though NVDA has run up for an entire year and is uncomfortable to buy here, there is no reason it can’t keep going up. So I’m considering adding to my NVDA position on this renewed strength. I will raise my stop-loss to $90 and pick up a few more shares.
Another, perhaps more speculative idea that might be worth a look is Ferrari NV (NYSE:RACE).
This fast car stock is off to a strong start since it’s IPO. I couldn’t resist picking up some shares this week as it hit new highs.
Personally, my stop loss is $53.30 and I think that’s reasonable for new positions. I wouldn’t risk more than about 0.5% of my capital on this one and will be quick to sell my stocks if it turns against me. On the other hand, I’ve always wanted to own a Ferrari. 🙂
Finally, UnitedHealth Group inc (NYSE:UNH) continues to power to new highs. So why not jump aboard and follow the trend? Here’s a look at the weekly chart:
As for me, I don’t own any shares of UNH at the moment. But I’m looking to add.
I’ll plan to buy next week with a stop-loss just above $152. And by the way, if you have any questions about stop-loss placing or when to sell your stops, read this.
Those are the key breakout stock picks I’m watching as we head into next week.
Given the holiday season, there will be no stock picks next week, although I may review some of my best stock picks form the year to show you just how great things have been recently for trend following traders.
Since I started writing regular weekly stock picks in September, we’ve had some really big winners and I cant’ wait to summarize them for you.
Finally, if you want to learn more about how to find breakout stock picks then I encourage you to fill out the form below to sign up for free email lessons.
They’ll help you understand the thinking behind these intelligent trend following breakouts.
Give it a try…