I am trialling a new trend following stock trading strategy. This strategy looks for stocks breaking out to new 52 week highs. The stock must also have decent sized volume, a PEG less than 1 and an RSI score less than 70. Trades are exited on a 20 week low. So far, results look promising but too early to say whether it will work longer term. I am paper trading this before taking it live.
Here are this week’s trend following stock picks. Both are in the auto parts industry suggesting that this is a good sector to be involved in as a whole. Normally I wouldn’t buy more than one stock in the same sector. Out of these two I’d go for MGA.
Magna International Inc ($MGA)
Magna International is an auto parts wholesaler based out of Canada with 128,000 employees in 29 countries. The stock has broken to a new 52 week high but the financials are in good condition. PEG is 0.99 and price to sales is 0.67. EPS has grown over 100% over the past 5 years and current ratio is 1.30. The stock also has 5% insider ownership.
Lear Corp ($LEA)
Lear was founded in Detroit, Michigan in 1917 and is a leading manufacturer of assemblies for the automotive and aircraft industries. PEG is 0.94 and forward PE is 10.30. EPS is expected to grow at over 18% over the next 5 years.