Posts Tagged ‘Swing Trading Volume’

Intraday Swing Trading Strategies – The “3Down” Chart Pattern

Thursday, December 13th, 2012

Intraday Swing Trading Strategies – The "3Down" Chart Pattern

This morning we were on the watch (as always) for one of our favorite chart patterns…the "3Down".

We had a few stocks on our list this morning but one stock that stood out like a sore thumb was $MON.

$MON was showing unusual relative strength this morning as the overall market tried to find its way.

Both the DJIA and S&P both sold off early and hit NEW LOWS on the third 5 minute bar of trading today.

Here is the chart of $DIA…

$DIA - Intraday Swing Trading Strategies

And now take a look at $MON for comparison…

$MON - Intraday Swing Trading

The strength is obvious.

So now that we know we have a strong stock in a relatively weak market what do we do?

We watch and wait.

As the $DIA finds a bottom and start to retrace $MON starts to pullback.

We know at this point that the chances are high that the strength in $MON will not continue if the market starts to push lower again.

If however the overall market transitions from weak to strong then $MON could make its next move higher.

The 10:15am bar is where all the action took place for this trade.

Here is the setup and the countdown chart for the "3Down"…

$MON - Intraday Swing Trading

Notice the first attempt to begin our countdown on the chart above.

The bar before the "XX" on the chart is the first "1" bar.

The next bars high is higher than the previous bar so we start over.

The bar after the "XX" starts our new count over at "1" since its higher is lower and its low is also lower than the previous bar.

The next 2 bars do exactly the same thing giving us our "3Down" setup!

Notice also how bar "3" has lower volume than bar "2". This means the selling is drying up.

Now that we have a valid "setup" we wait to see if we get an entry signal.

The 10:15am bar (marked with the BLUE arrow) provides us with a text book entry.

The volume starts pouring into this bar early so we can figure the price action will move one way or the other.

This bars low never trades below the low of the previous bar…bullish!

This bar trades above the high of the previous bar…bullish!

As the bar develops BUYING volume increases…bullish!

We are in the trade at $90.27 (.02 above the previous bars high) and we set our stop at $90.12 (.01 below the previous bars low) for an initial risk of .15/share.

Our STS profit target is at 2x the initial risk (2 x .15 = .30) so we set it at $90.57 ( $90.27 + .30 = $90.57).

Three bars after our entry $MON hits $90.57 (trades up to $90.61) and hits our target before beginning another pullback.

Swing Trading Week in Review – November 2, 2012

Sunday, November 4th, 2012

Swing Trading BLOG – Swing Trading BOOT CAMP

$DIA - Swing Trading ETF

**Our thoughts and prayers go out to the victims of Hurricane Sandy**

After a historic decision to close the US Stock Markets both Monday and Tuesday we opened up on Wednesday with a bit of uncertainty.

Low volume was the theme even as the market popped a little on Thursday.

Friday brought out the sellers again and starts what appears to be the next leg down in this recent down trend.

If you at the charts you can see that volume increased and the bearish engulfing bars created on the three major indices are down right bearish.

The one bright spot this week?

The Homebuilders ($XHB) actually traded to a NEW HIGH despite the overall bearish conditions.

That is about as good as it gets since almost every other sector sold off with the market.

A few weeks back we mentioned that the Gold and Silver sector ETF's were losing steam.

Friday both sectors got hammered!

$GLD - Gold Sector ETF

The technology sector and the tech heavy NASDAQ have been the worst performers with no end in sight.

The Energy and Oil sectors look like they are heading lower.

The chart of the Financial ETFs look interesting.

$IYF - Swing Trading ETF

Will this lower high lead to a head and shoulders pattern on the charts?

Time will tell but learning to spot patterns as they form is a key to trading price action.

Next week should be a big week in the market and you should expect some volatility.

Have a plan in place and trade it accordingly.

Keep the victims of Hurricane Sandy in your thoughts and prayers and as always…Good Trading to YOU!

Swing Trading Week in Review – June 29th

Sunday, July 1st, 2012

Swing Trading BLOG – Swing Trading Boot Camp

DIA - Swing Trading ETF Strategies

Despite two big GAP DOWNS on Monday and Thursday that market finally found its legs.

Friday trades watched as the market GAPPED UP and finished the week with a nice rally to the close.

The rally actually started at the end of the day on Thursday which gave swing traders a clue of things to come for Friday morning.

Paying attention to intraday price action can often times give you a "heads up" to what the big money is doing since  a lot of orders go in during the last two hours of each trading day.

Once we saw the rally Thursday afternoon (along with the volume that accompanied it) we were pretty sure that the market was going to lift off the next day.

This would mean that some of our SHORT positions would not follow through and would probably stop us out.

So what did we do?

Nothing. Absolutely NOTHING DIFFERENT.

Did we cover our SHORTS? Did we flip those SHORTS to LONGS?

No and No.

Simply put we traded our plan.

We have learned over the years that we should never try to out guess the market.

In hindsight it east to say that we would have been smart to COVER and even FLIP TO THE LONG SIDE but that is not always the case.

Being almost positive that you are right can cost you…big time.

Our trading plan is very specific.

We enter our trade and place our stops. We set our profit target(s) and manage our trade per our plan.

Then we let it play out one way or the another.

Either we get stopped out OR we hit our profit target.

We don't change our rules based on what we think the market is going to do.

We told you last week that we trade both sides of the market and get stopped out (on the wrong side) once the market finds its true direction.

This week was a great example of this.

When the SHORT trades stall and STOP GOING DOWN that should tell you something.

A lot of good looking SHORT set ups didn't follow through and actually created a higher low this week.

CREE - Swing Trading Strategies

When your LONG trades are breaking out on good volume that should tell you something as well.

WMT - Swing Trading Strategies

Learning to read the price action and volume during these times is crucial to identify turning points in the market.

This is exactly what we mean when we say to "listen to the market and act accordingly".

Until next week…Good Trading to YOU!

Swing Trading Week in Review – June 8, 2012

Sunday, June 10th, 2012

Swing Trading Blog – Swing Trading Boot Camp

$DIA - Swing Trading ETF

Swing Traders watched as the market puts in it's best week of the year this week.

After nothing but doom and gloom and talks of the next wave of the recession looming the market took off like a rocket this week.

But not everything is peaches and cream in stock market land just yet.

For one thing the volume on the recent UP move has been lackluster at best.

You can't really argue that it's summer time since the SELLING VOLUME we saw just 2 weeks ago spoke loud and clear.

Secondly all three indicies and almost every sector ETF are still trading below their 50 day SMA's.

The markets haven't traded under their 50 day SMA's for this long since the third quarter of last year.

And finally we still have plenty of overhead resistance to break through before I would start looking for the bull to return for any length of time.

Lets be honest…it still a bearish short term market (for now).

So what is your swing trading strategy in a market like this?

Our strategy remains the same. We SHORT (or use inverse ETF's) we the market is weak and go LONG when the market is strong.

At times of transition in the market we start to see less follow and tend to get stopped out a bit more.

As SHORT TERM TRADERS these are the clues that keep us on the right side of the market.

If the market does start to turn to the upside we will notice and hopefully be able to profit from it.

Have a trading plan in place so whatever the market decides to do from here you will be ready.

Until next week…Good Trading to You!

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