Swing trade ideas in trending stocks, for the week of April 12, along with educational comments. Stocks mentioned: $PTC $LUV $VLO
These trade ideas are based on the Trending strategy covered in the Stock Market Swing Trading Video Course.
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. Do your own analysis and see if you come to the same conclusion.
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 more stringent on what trades you take.
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 earnings, different order types, and stop loss and target levels that are based on the stock’s specific movements.
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
PTC Inc. (PTC)
Overall, strong uptrend. If you check the retracement levels on the pullbacks during the uptrend, most have been between about 30% and 50%…and the current pullback is also in that area.
I don’t love the strong selling we saw in late March. With a drop like that there is the possibility that we could see a bit more of a drop. That said, we are seeing the price stabilize and that’s a positive.
Reward to risk is decent at about 2.7:1. If we do see a bit more of a decline, I want the decline to be weak and then stabilize again. If that occurs, a second long positions can be taken (if the first is stopped out).
There is a little lesson in that: traders can vary the strategy slightly by adding their own touches. For example, on many of trades, I do like to wait for the price to try to push lower. If it does, but it can barely make a new low before rallying again, that is good (see my chart comment on LUV below)! It shows more evidence that the selling has dissolved. It requires more patience, and may also mean missing some trades that just shoot higher, but some losers are also avoided. It’s a trade-off and a personal decision on whether you take trades signals as you see them, or if you wait for a bit more evidence (like the false downside breakouts, or another little drop that quickly stalls out–both show waning selling pressure).
For these new charts, to zoom in, just click Full Screen, and click Full Screen again when you are done looking and want to continue reading.
Southwest Airlines (LUV)
This one just moved out of the buy zone recently, but was another nice setup. There are times that I will get out of a trade if it moves aggressively toward the target but then comes back to the entry point. With that sharp move higher the price should be able to make it to the target before moving back to the entry point. If the price moves to the entry point, that starts to look a little more grim for the longs as the price would have just put in a lower high. In that case, if the price keeps falling that would be a head and shoulders pattern. Think ahead…think about what is forming, as it is forming. It doesn’t mean that pattern will materialize, but with that very deep pullback we need to be a bit cautious.
Valero Energy (VLO)
Here is one with a different look, as the price is forming a triangle pattern. This happens quite often. Pullbacks (during an uptrend, or downtrend) aren’t always just a clean temporary decline (we buy) and then a rally to new highs. Lots of times this sort of pattern will develop, or a sideways range. The pullback buying method is still valid, assuming the lows of the pattern where we buy are still in the strategy entry area (for uptrend).
Buy near the lows of the pattern using the consolidation breakout method. BUT, if you price has already made a couple waves within the pattern, be conservative on the target (exit near top of pattern for short-term trade). The longer the pattern lasts, the more you will likely want to wait for a false breakout to tell you the bigger move is coming. In this example, I prefer to wait for the price to drop below the triangle, AND THEN rally above the recent consolidation (or any future consolidation that may form) to trigger a long trade. To me, this would help signal a bigger move is coming, so the convention target method can be used.
Buying near chart pattern support in uptrends, or selling near pattern resistance in downtrends, is discussed in the “Front Running” chapter in the Forex Strategies Guide For Day and Swing Traders. It is just a slight variation of buying during the pullback (uptrend)…the pullback just looks more complex when a pattern forms.
It’s Easter week…a short trading week, and I am off to visit family. So I will leave it at that. Any swing trades you are looking at? Post them in the comments.
Trailing Stop Losses?
I get asked a lot about trailing stop losses, and should it be used? By all means you can use them. My personal experience has been that there is a tendency to get too aggressive with them, so people end up with lots of small profits and still a handful of full losses. Basically, the reward to risk ratios over many trades get messed up, and the few extra small winners often don’t compensate for that. BUT, since each of us sees different trade setups (loads of stocks out there to choose from) and we may alter the strategy slightly to suit our personal tastes, it is possible that the trailing stop loss will work for you.
Test it out and track the difference in performance between leaving your trades alone and utilizing a trailing stop loss. Over the next 30 to 50 trades or so you should start to notice if you prefer one method over the other. Whatever method you use, just jot down how the trade would have worked out using the alternate method. Compare your results after a bunch of trades. You can also look at how your past trades would have worked out using an alternate method.
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.