Posts Tagged ‘Swing Trading Strategies’

Swing Trading Week in Review – July 23, 2010

Saturday, July 24th, 2010
DIA - Swing Trading ETF

Wow! What a difference a week makes!

After last Friday's sell off every talking head in the media was predicting "doom and gloom" and DOW 8000.

When the market closed today you heard nothing but what a GREAT market this is and how we could be headed for new highs!

I have long ago dismissed most of what is said on CNBC, Bloomberg, etc. and watch and listen now solely for entertainment purposes.

As a trader I think it can be very misleading and can often times cloud your decision making process.

Do your own research and follow the rules of the system you put in place based on the result of your research.

I say this because a few traders that I talked to this week said that they were not even looking to the LONG side of the market because "everyone I hear on TV is bearish on the market".

As a short term trader you need to be in sync with market.

By being "in sync" with the market often times you can profit from short term price swings regardless of the overall market environment.

Being prepared for whatever the market does is half the battle.

During our "Swing Trading Weekly Wrap Up" webinar last night there was one question that came up a few times.

A few people asked how we were able identify any LONG trades this week since the overall market was in such a obvious DOWN trend.

These traders, like the ones mentioned above, were also only focused on the SHORT side of the market and essentially missed the move up in the market this week.

Part of our answer to this question is that we ALWAYS have a list of STRONG and WEAK stocks and ETF's on our watchlist.

During the past few weeks we have been mostly focused on the WEAK stocks since we were in a down trending environment.

At the same time though we maintained a list of stocks and ETF's that were showing relative strength to the overall market.

When the market gives us "clues" that it may be transitioning from one mode to the other (in this case from DOWN to UP) we are turn to this list to look for trading opportunities.

For beginning swing traders we always recommend that you trade on the same side of the 50 period SMA as the overall market.

We use this as a "dynamic" trend line to keep new traders on the right side of the market.

So, for example, if the market is trading below the 50 period SMA look for trade setups in stocks and ETF's that are also trading below the 50 period SMA.

When the overall market is trading near the 50 period SMA looking for trade setups on BOTH sides of the market is often times a good idea.

That way when the market gives you confirmation on which way it is headed you can on the right side if the market and take the appropriate trades.

This week we saw this exact setup in the market.

DIA - Swing Trading ETF

After hitting new yearly lows at the beginning of the month the market put in a decent retrace until July 14th.

The next move DOWN started on the 15th and was followed by a "high volume' sell off last Friday.

During this time most of our SHORT trades (ALL, MET, ZION, LNC, etc.) worked out very well and we were able to take profits in our positions.

Some of our other SHORT positions (SLX, CLF) we a little slower to move to the down side.

Since we are SHORT we need to see a few things to let us know that the trend is still down and going lower.

We need to see price action moving lower and volume moving higher.

This lets us know that sellers are jumping back on board to move prices lower.

Monday the price action in the overall market and in some of our positions was less than impressive.

Volume was significantly less than Friday as well.

Not exactly the follow through you would expect after such a big sell off on Friday.

Our slow moving SLX SHORT actually creates a low volume "inside day"…a classic price stall.

SLX - Swing Trading ETF

We failed to get what we need to confirm we are still headed lower.

This "stalling" price action gives us our first "clue" and puts us on "high alert" that sentiment MAY change.

These "stalls" dont give us an exit signal from our SHORT positions just yet.

We still need confirming price action (and volume) to take action.

Tuesday's "gap and go" was CLEAR sign that SHORT was the wrong side on the market.

We were able to cover our SHORT in SLX for a tiny profit and our CLF SHORT at break even.

We not only covered our SHORT trade in SLX we actually flipped to the LONG side based on the context of the market and the sector itself.

SLX - Swing Trading ETF

We did NOT flip to LONG in CLF but we did buy AKS since it had a stronger chart pattern.

Notice the LOW volume 3 day pullback prior to AKS ripping higher.

AKS - Swing Trade

Both SLX and AKS were trading at their 50 day SMA's and Tuesday UP move created a DOWN trend break out in both as they traded and closed above their 50 day SMA.

These were both "trend transition" type trades and may have been a little difficult for some traders to identify.

There were however plenty of STRONG stocks (trading ABOVE their 50 day SMA) to turn to once the market started its UP move.

Several chip stocks (ALTR, XLXN, MCHP, LLTC) were showing tremendous relative strength lately and offered up some nice trade setups.

Plenty of other stocks presented the same opportunity – HAL, ALK, CRM, AKAM, HMIN, NTAP, AXP, JNPR, and ATVI just to name a few.

Pull up the charts so you can see how these "strong" stocks reacted when the market pushed to the UP side.

Be prepared for anything and everything!

If you want to know exactly how we find the best Swing Trading Setups please join us at our upcoming webinar this Friday night!

You can register HERE!

Until next week…Good Trading to YOU!

Swing Trading Week in Review – July 16, 2010

Saturday, July 17th, 2010

Another interesting week in the market!

After pulling back off of the recent lows the market heads back down as sellers aggressively drove the market down on Friday.

DJIA - Swing Trading

Last week we saw the market pullback on LOW volume so going into this week we were looking for signs that this "retrace" was losing steam.

Monday and Tuesday's price and volume action let us know that the overall market had NOT yet ended its retrace BUT some of the individual stocks and ETF's that were on our watch list told a different story.

Since we have recently taken out the February lows in the market and we are still trading under the 50 day SMA our bias remains to the SHORT side for our "bread and butter" strategy.

In a perfect world we would be able to time our trades to match when the overall market makes its move but usually that is not the case.

Often times individual stocks (or specific sector ETF's) will lead the market by moving prior to the overall market.

In a down trending environment we often see the "weakest" stocks start to move lower even as the market is moving slightly higher.

The opposite is true for a up trending market.

"Strong" stocks will often breakout well before the overall market gives you confirmation that it is going higher.

We saw this happen at the beginning of the week as several of the stocks on our watch list triggered a SHORT entry signal.

Monday the market started to head lower but ended up closing near its high albeit on lower volume.

When the market gapped up on Tuesday some of our SHORT positions moved UP with right along with it.

The gap up in these stocks was of some concern but most stayed well below our initial STOP LOSS levels so we simply held  our positions.

Allstate (ALL) is one our trades that triggered on Monday.

ALL - Short Swing Trade

After hitting new yearly lows last week ALL put in a nice LOW volume 3 day retrace at the end of last week.

Monday you can see how ALL traded through Friday's low on increasing volume.

Our SHORT entry was triggered and we set our initial STOP LOSS level at $29.87 which is 1 ATR ( .77) away from our entry ($29.10).

ALL - Short Swing Trade

It is important to note here that by using the Average True Range (ATR) of the stock we were able to position our stop above an area where a chart pattern based stop would have been placed.

Using our Average True Range (ATR) again we would use a multiple of 2 (2 x .77= $1.54) to set our profit target at $27.57 ($29.20 – $1.54= $27.56).

However based on the chart we set our initial PROFIT TARGET at $27.78 which is just above the previous Swing Low at $26.68.

This is not quite a 2:1 risk/reward  but we put our target just above the possible support level and would cover a portion of our position at this level and let the remaining shares run.

Tuesday you can see how ALL gapped up a bit with the overall market but stays well below our ATR based stop.

ALL - Short Swing Trade

Wednesday ALL finally follows through to the down side and volume increases even as the overall market holds up.

ALL - Swing Trading

The end of the week brings more more of the same and near the close on Friday ALL hits profit target #1 as the market sells off.

ALL - Short Swing Trade

Some of the other stocks on our list that turned out to be good SHORT trades were APC, ZION, CLF, and SLX.

There were a lot of trades this week and its hard to go over them all in this BLOG.

At our "Indicators and Oscillators" webinar last night we went through each and every one of our trades.

We analyzed trades in MOS, AKAM, ALTR, XLNX, and ETF's like DXD, SRS and SKF.

We discussed how we use our indicators in conjunction with price action, volume and trend lines to make our trading decisions.

Based on the feedback we received it was a very insightful webinar for you short term traders!

Our next webinar is our popular "Swing Trading Weekly Wrap Up" where we do more of the same.

We analyze the market and sector ETF's and go over our trades in detail.

Please bring your questions and the symbols of the stocks or ETF's you want to discuss.

We look forward to seeing you there!

Until next week…Good Trading to YOU!

Swing Trading Week in Review – July 2, 2010

Saturday, July 3rd, 2010

In last weeks Swing Trading BLOG post we said that this would be a pivotal week in the market.

Well after the dust settled this week it was VERY CLEAR that the BEARS are in charge!

After Monday's "inside day" price action and volume spoke LOUD and CLEAR on Tuesday as the market gapped down and continued to sell off until the week came to close on Friday.

DJIA

The last few weeks have been tough for Swing Traders and this week was no exception.

This week was tough for Swing Traders for a few reasons:

Starting in early June we had nine days where we basically went straight up and now we have had about ten days of trading where the market has gone straight down!

If you are "pullback" trader like we are there has not been many chances over the past month or so for you to implement your trading strategy.

If you did  not have a plan in place and were NOT prepared for Tuesday then you may have "missed the boat" when the market gapped down and sold off for the rest of the week.

This has been a "fast market" and by that we mean that there ARE chart patterns and pullbacks to trade BUT these pullbacks are shallow, maybe a day or so, and then they continue to move.

This type of price action creates "fast" trend channels and for most traders these are much more difficult to identify and trade.

Lets take a look at some of the stocks we have been following lately to show you what we mean.

Last week we walked you thorough our entry into Nemont Mining (NEM) on a LONG Swing Trade.

This is the chart from last week.

NEM - Long Swing Trade

As we told you we were able to exit some of our position at $61.67 during last Friday's afternoon rally and we were holding on to the rest with a trailing stop.

Here is how the chart looks at the end of this week.

NEM - Long Swing Trade

NEM broke out to NEW HIGHS last week so we were expecting some type of follow through to the UP side this week.

Monday NEM stalled and was followed by two days (Tuesday and Wednesday) of slightly UP price movement combined with decreasing volume.

This combination should be a BIG FLASHING YELLOW LIGHT to you just as it is for us.

Our trailing stop was hit at $60.75 on Thursday as NEM traded down through the low of the previous day.

We have marked both of our exits (Exit 1 and Exit 2) on the chart above.

Still a profitable trade but not what we expect from a stock breaking out to new highs.

At pivotal times in the market we often have a few LONG positions and a few SHORT positions and more often than not we get stopped out of the trades that end up being on the wrong side of the market.

One of our losing trades (we had a few) this week was in Sandisk (SNDK).

Here is the chart of SNDK to give you the context…strong stock making higher highs and higher lows.

SNDK - Long Swing Trade

During this weeks trading action MONDAY was the make it or break it day in our opinion.

We have been following the recent strength in SNDK so after last weeks pullback we were ready to get LONG again on the first sign of strength.

Monday we got what we were looking for as SNDK traded through Fridays high just as the market also attempted to trade higher.

Our entry was triggered at $47 and our initial stop was set at $44.92 for a $2.08/share risk.

When the market did not follow through on Monday SNDK reversed midday and ended right at the low of the day.

One of the hardest situations that Swing Traders face is what to do when you have a BIG opening gap (up or down) in the market.

Tuesday morning that is exactly what the market did as it opened up the day down significantly from Mondays close.

Like most stocks SNDK was no exception and gapped down with market and opened at $44.76 which was BELOW our initial stop.

Our exit strategy when this happens is dependent on the context of the overall picture that the market, sector and individual stock is painting.

in this specific example the strategy calls for an exit on the open for a number of reasons.

Our actual exit price was $44.74 so we actually lost  $2.26/shareMORE than initially planned.

Here is a zoomed in version so you can see the details a bit better.

SNDK - Long Swing Trade

This losing trade in SNDK shows you why having a position sizing and money management strategy in place is so important.

Due to the frequent overnight gaps we face as swing traders we recommend that you have a "buffer" built in to your position sizing strategy to allow for a "worst case" scenario.

When strong stocks like ALK, NTAP, SNDK and MELI start to break down at pivotal times that usually means our SHORT positions (weak stocks or ETF's) are continuing to sell off.

The "weak" Retail (RTH) ETF continued its sell off this week but you almost had to be in this position coming into the week.

The other noticeably weak sector, the Homebuilders (XHB), offered you yet another opportunity to get SHORT as it broke to NEW LOWS on Tuesday's "gap and go".

Other SHORT trades that worked out nicely were LPNT, ERTS, X, and MGM.

I mentioned above about this being a "fast" market and here are a few example of stocks with "fast channels" to demonstrate my point.

PCAR - Fast Trend Channel SNPS - Fast Trend Channel LRCX - Fast Price Channel

In all of the charts above you can see that after pulling back from their recent highs all of them attempt to move higher on Monday.

They all fail to move higher the next day essentially creating a one day UP move before continuing to sell off.

If they all would have moved higher for another day or so the chart pattern would have painted a more clear picture for those traders not yet skilled at identifying this type of "fast" trend change.

Probably the best example of just how 'fast" this market has been is to look at the overall market ETF's for the DJIA (DIA) and the S&P 500 (SPY).

DIA - Swing Tading ETF SPY - Swing Trading ETF

You can see how the market sold off everyday last week as it put in its first pullback after the 9 day up move.

Monday you can see how price "stalls" and creates an inside bar.

Tuesday the market "gaps down" and sells off for the rest of the week not giving swing traders much of a pullback to SHORT.

In order to capitalize on this type of "fast" price action you need to learn how trends transition and use price action and volume as your leading indicators.

These are the exact strategies we teach in our PVT Trading Tactics class so if you would like to learn more you can check it out HERE.

Until next week…Good Trading to YOU!

 

 

 

Swing Trading Week in Review – June 25, 2010

Friday, June 25th, 2010

Swing Trading Blog Post-

Well after the markets last "mini" rally off of the February lows that market finally put in long awaited and much anticipated pullback this week.

DIA - Diamonds ETF

The two "weak" sectors, Retail (RTH) and the Homebuilders (XHB), we highlighted in last weeks BLOG POST (and in last Friday nights webinar) sold off nicely and actually made NEW LOWS as the market pulled back this week.

RTH - Retail ETF XHB - Homebuilders ETF

Coming into this week there were several SHORT Swing Trade setups in some of the stocks the these "weak" sectors.

WSM, WMT, JCG, ANF and many others were on our SHORT Watch list this week and they all moved nicely to the down side.

The "strong" stocks we talked about last week (AKAM, ALK, NTAP) all pulled back with the overall market this week.

The strongest sector we discussed at the webinar last Friday was GOLD and the GOLD MINERS.

After a nice run up last week you saw most of the stocks and ETF's in this sector put in a short retrace from Monday through Wednesday this week.

GDX - Gold Miners ETF

On Thursday we got our entry signal for several stocks but lets take a look at Newmont Mining (NEM) since this stock seemed to be the leader of the pack in the last UP move.

NEM - Long Swing Trade

NEM BROKE OUT to new multi-year highs last week so were "stalking" this stock waiting for another opportunity to GET LONG after a decent pullback.

Here is how the chart looked last Friday.

NEM - Long Swing Trade

After this nice strong UP move through the previous high (black line) we waited for the first pullback.

That pullback started on Monday and we watched price firm up a bit by the close on Wednesday as it traded around the area of the previous high.

We were watching this previous "resistance" level to now become the new "support" level.

NEW - Long Swing Trade

We still need price action to confirm that this area would hold as "support" and we received this confirmation on Thursday morning.

Right out of the gate on Thursday NEM traded through the high of the previous day ($59.43) giving us an entry signal at $59.45.

NEM moved up for most of the morning only to close the day well below the open.

Another intraday reversal!

Here is how the chart of NEM looked by the close of the trading day on Thursday.

NEM - Long Swing Trade

Price and volume were both increasing but the end of day reversal made it a little tougher for us to determine if the volume was bullish or bearish.

The next day we needed to see the signs that NEM was going to move higher.

Today (Friday) we got exactly what we needed from NEM.

Price moved higher on increasing volume throughout the day.

NEM - Long Swing Trade

Early this afternoon we were able to piece out of some of our position in NEM at the $61.67 level.

We are trailing our stop in NEM based on our BREAKOUT strategy rules and will exit the rest of our position just as our plan and this strategy dictates.

NEM is breaking out to NEW HIGHS once again and the sector as a whole is showing some tremendous strength so we are hoping to see some nice follow through next week.

Speaking of next week it seems that we are really at a pivotal point in the overall market.

We have taken out the last "swing high' and rallied up to (but still under) the 50 day SMA.

We are now in the process of pulling back from the high of the recent up move.

Another run up towards the 50 day SMA wouldn't surprise us at all.

On the flip side though there are still a lot of "weak" looking chart patterns and a some stocks and sectors making NEW LOWS.

So what is a SHORT TERM TRADER to do?

Be prepared for anything!

You have heard that somewhere before right? (this BLOG over and over and over)

As always we will have a list of STRONG and WEAK stocks and sectors on our Watch list  for Monday.

That way no matter what the market decides to do we can take the appropriate action and get ourselves on the right side of the market.

Until next week…GOOD TRADING TO YOU!

P.S. Feel free to join us Friday July 2nd at 6pm for our next "Weekly Wrap Up" webinar.

You can click HERE to register!

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