Stock Swing Trades to keep an eye on, based on strong trending movement or consolidations that could breakout. Stocks mentioned: $S $EXTR
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.
For further guidance on swing trading, see the Stock Market Swing Trading Video Course. Some these stocks here are a variation of the strategies discussed in the course, and I will explain how those variations work in the examples below.
Strong uptrend over the last year. The price has consolidated in a triangle pattern above the 40% retracement level (there is nothing important about that particular level, just that it is within the entry area I look for).
There are two options here. Buy near the bottom of the triangle, and that trade produces about a 4.3:1 reward to risk ratio. The other option is the more classic technical analysis approach: waiting for a breakout. The breakout trade results in a reward:risk of about 2:1 (a bit less).
You will also notice an indicator on the chart called an ATR Stops. That can be used as a trailing stop loss. If the price closes below the ATR Stops level, then place an actual stop loss a couple cents below that close (if long).
Since a lot of people ask about trailing stop losses, this is an option I have been testing that seems to work quite well. A stop loss is also placed when the trade is initially taken, just in case the price drops right away before moving favorably.
Note that sprint has earnings in a couple weeks, so may want to hold off until after that. Unfortunately that happens a lot around this time of year.
To use these new charts, click the full screen button, and then click full screen again to come back and continue reading. Click the “Play” button to see how the price action unfolds after the chart has been published. Fancy!
Extreme Networks (EXTR)
Another high flyer. Very strong uptrend, pulled back into the buy zone, consolidated and then broke higher.
One thing I have been testing is to wait for the consolidation breakout on a daily close basis. This results in a bigger stop loss typically. For example, in this case the trade wouldn’t have been taken until the end of April 17 or the open of April 18. This results in a worse entry than the consolidation breakout method, but produces a lot less false breakouts (where we enter on a very small breakout of the consolidation, and then the price falls right back in). In the chart I have shown this entry.
For these strong movers, the ATR Stop tends to do a good job. If using the trailing stop loss method, the target is irrelevant.
Note that earnings are coming out soon, so best to be out before that. So not a lot of time left for this trade to develop, but it was a bit different look, so worth sharing.
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.