- The Global Trends ETF updates are based primarily on the quarterly Plug & Play ETFs and secondarily offer some swing trading opportunities.
- This piece is updated weekly using both daily and weekly charts.
- We are looking for overbought and oversold signals, as well as, buy the dip opportunities within an uptrend.
- When trading around the edges, always mind your broader asset allocation to prevent overextension.
- With swing trades, I generally recommend a trailing stop of 12% and/or a price level stop.
The Global Trends Trends ETF weekly update is for finding spots to enter positions in longer term rising trends (position trades measured in quarters and years) and to catch pivots or trends (swing trades measured in weeks or months).
Make sure to read Technical Trading Basics: Using Overbought And Oversold Signals To Buy And Sell before using Global Trends ETF updates.
Weekly Vs Daily Charts
The Plug & Play is based on weekly technical charts for entering our fundamentally screened ETFs for position trades. Using weekly charts gives us perspective on the longer-term trends that can last for many quarters.
Here we will also use daily charts for swing trading. In these cases we generally also want to find some catalyst that will help use crystalize a pivot opportunity, i.e. earnings, revenue, customer, deal or merger announcements.
Weekly chart of QQQ:
As you can see, the weekly chart offers a great view of the longer term trend. On the weekly, the RSI is just coming off of overbought and likely has a bit more corrective action to come. There is a possibility of a more substantial correction as well.
Daily chart of QQQ:
Here you can see that price action is heading down in the very short term. Remember, it can become very oversold for a period, especially, in cases where the weekly RSI and other technical indicators are overbought or just coming off of overbought.
The daily RSI is not oversold yet in this example. Given the nearly overbought status of the weekly, we would want to wait until the daily is all the way to oversold.
In situations where the weekly is more in the middle, but stable, or coming off of a near oversold or oversold condition, we could be more aggressive buyers on a daily oversold.
Ultimately, what we are doing for ETF Trends is comparing weekly and daily time frame technical charts to find spots to deploy cash. It is not always so easy as investing on a big correction.
Buying the dips on rising trends is a viable strategy though. However, we must be diligent not to overextend on risk prior to big downturns. This is another reason that scaling in is so important.
I also recommend this book:
ETF Trend Trading Checklist
- Only buy a percentage of your portfolio that you are willing to hold long-term if a trade goes badly. Manage risk with position sizing.
- Scale in and scale out. Your intention should be 2 or 3 purchases and sales per position. Buy and sell prices should be 3-10% apart. Trying to be too perfect with just one buy or sell is a recipe for disappointment and sometimes disaster. Manage risk by having multiple buy and sell prices.
- If a position moves against you, make at least one quick systematic scale out sale so that you might buy that portion back at a lower price. Manage risk by using a trailing stop on a portion of each of your positions
- Do not buy an ETF when it is falling in price. Scale in after the ETF has resumed an uptrend or entered a sideways consolidation pattern. Manage risk by respecting price trends.
- Ride your winners until the upward momentum stops, then start to scale out. Pay very close attention when a target price is met. Manage profits by allowing them to be given to you.
Investing Quick Thoughts
There are no absolutes with investing. There are no secret formulas. There is no fool proof system. But, by using our 4-step process which uses secular trends, government & central bank policy, fundamentals and then finishes with technical analysis, we can mitigate many risks and find many opportunities over time.
So long as we manage risk, there is in fact an endless stream of opportunities. That is why FOMO – fear of missing out – makes no sense.
We want to err on the side of being invested vs being heavy in cash most of the time. The simple reason is that the stock market rises over time. Even in bad times, the government and central banks ride to the rescue at some point.
There is always some asset class or sector in an uptrend or poised to rise soon, i.e. pivot higher. Our goal is to invest in those places.