Swing trade ideas based on trending stocks, or stocks undergoing a trend reversal, for the week of January 10. $CNX $PTC $LSI
Each week I will try to publish one or two stocks that suit the trending strategy (and/or reversal strategy) covered in the Stock Market Swing Trading Video Course. I will be publishing these articles once a week on Tuesday or Wednesday afternoon (EST).
These articles aren’t meant to be trading signals. Rather they are meant to show the types of stocks I like the look of when it comes to the implementing the strategies discussed in the course. Don’t take my word for it. Do your own analysis and see if you come to the same conclusion. These stocks are not necessarily the best trades out there, but they have been picked because there is some educational value to them. If you come across some other stocks you like, share them in the comments, along with how you found them (screener discussed in the course, screener you developed, etc).
There are usually multiple stocks that suit the strategy each week, so this is just a sampling. That said, finding one or two swing trades a week is ample. If you are trying to trade more, and your success rate is low, you are very likely overtrading and you need to be much more stringent on what trades you take.
Based on the entry point that I see, I will provide a risk/reward ratio. Based on this, you can estimate where my stop loss and profit target are (as outlined in the course). Again, I don’t want these articles to be viewed as trade signals, but rather a learning device. There is a lot more to trading than just buying at price A and selling at price B. There is risk management, position sizing, trading psychology (sticking to a plan, etc), being aware of news, different order types, and stop loss and target levels that are based on the stock’s specific movements. Therefore, I don’t recommend you trade these stocks unless you know what you are doing. If you want to know what to do, check out the Stock Swing Trading Course, and then practice in a demo account until you have proven yourself consistently profitable with the approach. Only then should any real capital be risked.
The filtering criteria for these stock swing trade ideas include:
- more than 500,000 average daily volume
- stocks or ETFs, but no leveraged ETFs
- Priced above $5
CONSOL Energy (CNX)
Trending up all year. Hit a new yearly high in Dec. Strong sell-off Dec. 12 which brought the price into the entry area (not a buying opportunity…will explain why in a second). A consolidation developed toward the end of Dec., but based on the strong selling earlier it was likely that there would be a bit more selling. Also, since mid-year when we started moving in this larger channel, retracements have been 60% to 80%…that first consolidation in later Dec. was above that. So be patient, a slightly lower price was likely forthcoming. We got that bit more selling and then a pop higher again right at the start of the year. Good for an entry near $18 (hint: limit order since we are catching the small pullback after the pop higher). Price is still in the entry area.
Reward:Risk = 4.89:1
This one triggered right at the start of the year and is well underway. Strong trend all year. As discussed in CNX, if the stock experiences a very steep drop, I usually expect a bit more follow through to the downside. On Dec. 1 got a very sharp drop then a quick bounce, but no trading signal there (and we wouldn’t take it anyway because of the very steep drop). The price fell again, which is what we are looking for. If it stalls out in our entry area then we have a potential trade. It did stall out, right near the Dec. low (and note how this drop was much slower than the last–what we want to see). Coincidently, a similar pattern played out Oct./early Nov. Entry near $46.78 (hint: buy stop order, as we had ample time to prepare for this one as it consolidated). Price is no longer in the entry area, therefore no new trades should be initiated until another valid setup occurs.
Reward:Risk = 3.11:1 (using a very conservative target. Could be pushed up to about 3.7:1 r:r).
On the short side, Life Storage (LSI) is consolidating around $86 to start the year. It has retraced about 50% of the major decline between Sept. and Nov.. BUT unless you want to pay the dividend, hold off on shorting until after Jan. 12…if the trade is still there.
Determine your Reward:risk after Jan. 12 if trade is still valid. Looks like it should be at least 3:1 (eyeballing)
On this chart, I have overlaid lines to show the major waves. This will hopefully aid you in seeing what I am seeing.
Losing trades WILL happen. Don’t risk more than 1% of your trading account on a trade (risk = difference between entry price and stop loss price, multiplied by the number of shares). There is always a risk in trading, and you can lose much more than you expect (even when you think you are only risking 1%). Don’t risk real capital unless you know what you are doing, have proven yourself profitable in a demo account, and can financially handle the ups and downs that come with swing trading.
By Cory Mitchell, CMT
Disclosure: This article should not be viewed as investment advice, and is not a recommendation for you to buy or sell. These are trade examples of a specific strategy. Past performance is not necessarily indicative of future performance. Unless expressly stated, I don’t have positions in the stocks mentioned..they are just examples for educational purposes.