Trend Following Trade Ideas For September 2019 (Part 4):

It’s hard to believe, but…  summer is (officially) over! And while the September stock market climate has been friendly the first few weeks of the month, things are starting to look a little shaky as the third calendar quarter of the year wraps up.

So let’s recap some of these key market trends! Plus…

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Now as I was saying, into the end of the week the market started to look a little bit soft. So let’s start with these developments in the headline market indexes (as well as other major asset classes) to get some context. Then I’ll show you some individual trade ideas.

Sept 2019 – Third-Quarter Stock Market Analysis:

One of the weird things about the market is how changes in price action can often align with changes in the calendar. In my own anecdotal experience at least, month-end, quarter-end, and year-end dates can correspond with changes in price trends. In fact…

You might remember last year the market was performing quite well, before violently falling apart as the calendar turned to October. So naturally, I’m on watch for that kind of thing again.

And it’s why I was alarmed to see the large-cap S&P-500 index falter into the end of the week. As you can see below, it closed near the end of its recent consolidation stage.

Trend Following Trade Ideas For September 2019 (Part 4) SPY

Now to be sure, SPY is still within a few percentage points of all time highs. So it’s not like I’m crying bear market or anything. And there’s always a chance price consolidates sideways, before bouncing higher.

On the other hand, if there’s further follow-through below $297 on SPY, I’d expect we could see more of a pullback. The top of the August trading range looks like an area where support may take shape, around $292 on SPY above. So keep an eye on those levels as the trading week unfolds.

Beyond the large-cap SPY chart…

Another area of potential concern is the relative weakness in some of the FANG stocks. It’s interesting to see these former leaders stumbling. For example, take a look at  NFLX, where you can see it closed the week on a soft note and remains well below all-time highs.

Trend Following Trade Ideas For September 2019 (Part 4) NFLX

This former market leader is taking a pause. If it can’t find support soon though, new leadership will have to take up the slack.  The good news is, there are some signs of this rotation.

Point in case, take a look at SMH, the ETF for the semi-conductor industry, which is near highs and might be ready for another momentum push up.

Trend Following Trade Ideas For September 2019 (Part 4) SMH

This kind of rotation can be a healthy phenomenon in bull markets as long as the weakness doesn’t spread. But it’s not just the stock market that’s at an interesting juncture…

Are Other Asset Classes Ready to Bounce?

Two of the trends that have been hard to ignore this summer were the strength in bonds and gold. While the stock market was treading water, these alternative assets were really rallying. And after a steep pullback, it looks like they might be starting to setup again.

First, let’s take a look at the TLT ETF as a proxy for bonds. You can see a strong bounce on the weekly chart below:

Trend Following Trade Ideas For September 2019 (Part 4) TLT

Now technically, this was actually an inside week. So although bulls were able to control the tape from start to finish, it was all within the range of the prior week’s selling. Personally, my guess would be for a little more sideways consolidation before the uptrend resumes.

After all, with another Fed cut out of the way, it’s possible interest rate pressures could continue (and thus bonds rally). And on a related note…

The chart of gold also bounced this week (after pulling back the last two). Take a look at GLD to see what I mean:

Trend Following Trade Ideas For September 2019 (Part 4) GLD

If you ask me, this is a pretty constructive pattern. And if you’re looking to diversify with precious metal exposure, a breakout from the current consolidation might provide better risk/reward than chasing a few weeks ago. Trading against the lows of the last two weeks might be a reasonable starting point for planning your approach.

Point being: there are many trade-able trends out there! And one of the great things about ETFs is they make it so easy to build a diversified approach to finding opportunity. Plus we haven’t even talked about the individual stock tickers charging higher.  If the market as a whole can cooperate, these might be worth a look.

Trend Following Trade Ideas For September 2019 (Part 4):

As I was saying, most stocks follow the direction of the market indexes. But if there is upside follow-through it can pay to be prepared with stock charts showing potential. In particular, I like to focus on new 52-week highs because it lets price be my guide. And to paraphrase George Soros, observing is better than predicting.

That’s why I want to point out a couple of strong charts from a few strong sectors. I always find this kind of top-down support can help put the odds of price appreciation further in your favour.

First up, as the market was limping into Friday’s close, healthcare stocks were showing relative strength. And one such idea that stood out to me was Bio-Rad Laboratories (BIO).

Trend Following Trade Ideas For September 2019 (Part 4) BIO

Now I know BIO is a little bit on the pricey side, with the stock trading over $300. But keep in mind, expensive stocks usually got that way because they increased in price! So let’s hope that capital appreciation can continue.

Another strong area of the market, perhaps because of the interest rate cut, are the yield-friendly REIT companies. The first of this group I wanted to point out was Clarian Global Real Estate (IGR):

Trend Following Trade Ideas For September 2019 (Part 4) IGR

In contrast to BIO, this is a much lower-priced idea. I know a lot of you like these small-cap stocks but, keep in mind they can be much more volatile.

A related stock that managed to close the week at the highs is insurance provider Essent Group (ESNT). This is another ticker that’s been going sideways for a few months but looks like it might be ready to breakout:

Trend Following Trade Ideas For September 2019 (Part 4) ESNT

With any luck, ESNT could start trending for another leg higher. After all, it’s only just taken out the 2019 highs with no overhead resistance in sight.

Finally, for those of you who like to try and catch breakouts in action (rather than buying the confirmed weekly chart candle), you might want to take a look at Radian Group Inc (RDN).

Trend Following Trade Ideas For September 2019 (Part 4) RDN

Unlike the other names above, this one hasn’t quite popped yet. But with the sector strength it’s worth keeping on your watch list.

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.

And plus…

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.

Speaking of…

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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