Tuesday, December 16, 2014

Chart of the Day: SIG

One of my favorite swing trade setups is the breakout-pullback setup.  While the market has pulled back, retail jeweler $SIG has held up well, pulling back to the key 50 dma level.  An entry here with a stop under the 50 dma and target near recent highs around $133 offers a nice 3:1 reward to risk ratio.  This is the type of risk ratio that successful swing traders salivate over.


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Thursday, December 11, 2014

Is Tesla's stock headed to the graveyard?

The market is littered with fad stocks that made swing traders lots of money off amazing runs only to fall by the wayside after a few years.  Pick up any of William O'Neil's books on trading and you will find tons of examples.  It looks like Tesla may be on it's way to the momo stock graveyard.

Everyone of these fallen leaders forms a topping head and shoulders pattern, followed by a trend line break and increased volatility.  That is exactly what we are seeing in TSLA right now.  In the chart below, take note of the classic head and shoulders pattern, along with the break of the trendline and 200 day moving average.



How do we trade this pattern?  Short weak bounces until they no longer work.

How does Tesla recover?  A remount of the 200 dma and trendline would bring it back from the dead and turn it into a momentum stock once again.

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Monday, December 08, 2014

The explosive biotech stock you must add to your focus list

Swing traders know that biotech has been the sector leading the market.  My favorite biotech stock right now is CEMP.

The keys to a great momentum stock are volume and price action. Volume has been pouring into the stock early October breakout.  Each new breakout has been followed by strong volume and low volume pullbacks.  These pullbacks show strong price action, with each breakout forming a trading range or box followed by a new breakout.

The new breakout forms a new box.  Let's watch for a new range to develop and then buy the bottom of the range.


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Friday, December 05, 2014

Trade Entry Review: VEEV

As a swing trader, one of my favorite setups is the breakout-pullback setup.  Yesterday I entered VEEV as it pulled back and tested and confirmed the bottom of the breakout bar.  The stop is under the breakout bar with an initial target near the recent high at $33.  This gives me a 3 to 1 reward to risk ratio.



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Wednesday, December 03, 2014

Chart of the Day: Zillow

A great swing trading strategy is finding broken down stocks that are ready to reclaim a previous uptrend.

Z was a momentum favorite that broke down a few months ago.  When a momo stock breaks down, I keep it in a special focus list in case the stock remounts a trend line and continues the uptrend.  Z is in that breakout-remount zone now and is consolidating above the moving averages.

An entry here (I and many Trade Report members have a position) with a stop under the 50dma and target around $130 offers great reward to risk.  These are the types of low risk/high reward setups swing traders look for.


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Monday, November 24, 2014

A textbook example of the breakout pullback setup: PTX

Swing traders must have a basket of setups in order to trade consistently and successfully.  One of my favorite setups is the "breakout-pullback" setup.  I recently went over the specifics of this setup on the BullsonWallStreet site, where my buddy Kunal hosts my Swing Trade Service.

PTX is a good example of this setup.  It broke out on strong volume and has now pulled back in orderly volume on low volume.  This is the type of price and volume action we went to see for this setup.

If entering here, a stop can be placed under $10, with an initial target at $11.50.  This gives us around 4:1 reward to risk.  That's what we love about this setup, we risk little to gain a lot.



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Tuesday, November 11, 2014

What You Must Know About This Market: Negative Divergence

No matter what the time frame, all swing traders are interested in trends.  Often the "eye test" of a chart does not capture the underlying strength of a trend.  For that reason, we monitor RSI near highs.  If RSI is not making a high while an index or stock is, that is what I call a negative RSI Momentum Divergence.

Take a look at the current QQQ chart.  Notice that it is basing near highs while RSI has failed to make a new high.  While this is not yet a short setup, it is a clue that momentum is slowing and a pullback is in order.  A close below the old high makes this a failed breakout and possible short setup.

To get a better understanding of the failed breakout trade, watch this video of a resent successful short trade.




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