Where Have All The Good Trends Gone?

by Greg Rieben October 01, 2019

I love trends. Especially price trends that even a child can recognize that a stock's price is moving from the bottom left to the upper right.

Lately, some of the most obvious and reliable price trends have started to cool off, leaving momentum and trend followers with not much to do.

"The trend is your friend except at the end where it bends." - Ed Seykota

Below are some of the best trends I've participated in over the last couple years. How do they look now?

Software

Software stocks have provided great opportunities over the last six months but with some of the more widely followed names selling off, the sector as a whole is beginning to flatline.

For now price is fighting to hold above old price support and the 200 day moving average.

Momentum/FAANMG

Some widely owned and traded momentum stocks have started to stumble in the tech space. NFLX, ROKU and SHOP are three that come to mind and are all trading down 25% or more.

The combined chart of FAANMG is also starting to cast some doubt on whether these tech mega-caps can keep the rest of the market afloat.

Failing to make new highs is always something to pay attention to.

IPOs

Many household names have recently gone public only to fall flat on their face.

Investors who bought WORK (-40%), UBER (-38%) and LYFT (-50%) right out of the gate have not been treated very well. Even Peloton PTON that went public last week is down nearly 20% from it's high.

Chinese Technology/Internet

2017 was an exceptional year to be trading in many of the Chinese tech stocks.

After selling off more than 40% in 2018 it's been a sideways to down grind for the better part of 2019.

Cannabis

Extremely volatile but great money making vehicles when they trend, cannabis stocks have provided multiple opportunities to make money for momentum traders over the last couple years.

However, over the last six months those who have been trying to pick a bottom are now facing some serious losses.

A major area of support has finally given way after holding up for 18 months.

Yes, the major indices are still trading near all time highs but I don't think this is something to hang your hat on if you're bullish.

We are starting to see some cracks showing up in some of the leading stocks and sectors.

This doesn't mean that the rest of the market will follow suit, but I think it's safe to say that you should proceed with caution if considering establishing new positions.