Swing Trading Week in Review – July 30th, 2010

The markets put in a bit of a retrace this week with both the DJIA and S&P 500 coming off of recent highs.

After last weeks UP move we got a bit of continuation on Monday but, as expected, we quickly ran into some overhead resistance and ended up selling off for the rest of the week.


Like we posted in our BLOG last week when the market put in a "gap down and rip" on July 20th we knew that the SHORT side of the market was NOT the right side (at least in the short term).

The price action and volume on the 20th triggered several LONG trades for us and ultimately stopped us out (most for small profits on break even) of our SHORT positions.

So now that the market was telling us "LONG" we had to start looking for any areas of overhead resistance that may come into play and possibly prevent the market from moving higher.

The price level we focused on was the June 21st high.

This was the day (price level) where the sell off started that ended up taking the market to new yearly lows earlier this month.

As the market moved higher last week and the beginning of this week we were focused on this area as a point where the market could start to lose some steam.

We will use the chart of the Diamonds (DIA) to stay consistent with the chart above.


Tuesday's trading brought the market right up to this level.

This was also the sixth day up in the market hinting that the short term move may be a bit "extended".

Now seeing an "extended" price move that is approaching possible overhead resistance does NOT always mean that a pullback or retrace is imminent.

Just like any other chart pattern you still need CONFIRMATION.

The price action and volume that we saw by the close on Tuesday was a good sign the our analysis may be correct.

The daily range (using True Range not ATR) on Tuesday was the smallest range of the six day rally and volume was a bit higher than the previous day.

This volume action combined with the day closing lower than the open was a "hint" that the sellers may be outweighing the buyers.

We also saw similar price and volume patterns in a lot of other stocks and ETF's.

Wednesday we see price move a bit lower but there is not much conviction as volume and range diminish again.

Thursday is the day that caught most people off guard!

The big GAP UP took price slighty above Tuesday's high (but still under the high of June 21st) and quickly rolled over and sold off most of the day.

We finally received the price and volume action that we needed and the retrace was now confirmed.

Friday we saw the market GAP DOWN but the buyers quickly stepped in driving the market higher intraday but ended up closing down slightly from Thursday's close.

So how could you have used this information?

Well it really depends of your Swing Trading strategy.

At our "Finding Swing Trading Opportunities" webinar last night we actually discussed how identifying price levels can lead to "action" steps in your trading plan.

For example if you were LONG stock's or ETF's (like we were) you could have tightened up your trailing stops.

Or if you Swing Trade both sides of the market (like we do) you could begin looking for potential SHORT trades knowing the possibility of a retrace is near.

We looked at a few of the overbought (using RSI) stocks that setup nicely for a short term pullback.

This is exactly what we do as our strategy, by design, looks for the strongest and weakest stocks and ETF's, and trades them accordingly when the market tells us to.

LONG trades like AXP, ALK, HAL, CAT, AKS and CHKP hit our profit targets so we simply exited our positions.

Sector ETF's TAN and DBA were also very nice trades with clear chart patterns to trade.

The weak stocks on our Watch List were the ones that did NOT participate in the recent rally.

Look at the charts of MRVL, CCMP, VSEA, NVDA, AMAT, ATHR, and SIRO.

These were the stocks to SHORT (if your strategy and plan calls for it) since they were screaming "weakness" during the entire rally.

Identifying price levels in the overall market can be a real asset for traders.

By identifying these levels, and waiting for confirmation. it allows you be in sync with the market which leads to quicker trading decisions and hopefully increased trading profits!

Until next week…Good Trading to YOU!

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2 Responses to “Swing Trading Week in Review – July 30th, 2010”

  1. […] This post was mentioned on Twitter by Gus, SwingTradingBootCamp. SwingTradingBootCamp said: New Swing Trading BLOG post – http://swingtradingbootcamp.com/2010/07/swing-trading-week-in-review-july-30th-2010/ – #ETF #swingtrading […]

  2. […] The 2 blue arrows above indicate the "double top" area that we posted in last week's BLOG. […]

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