5 Steps That Will Save Time and Create the Perfect Swing Trading Watchlist

Every trader knows time is money

Beginning swing traders make trading way too complicated. The beauty of swing trading is that once you know what you are doing, it does not take much time to trade like a pro. This is why swing trading is great for part-time trading.

If you are spending more than an hour a day researching swing trading stocks, you are probably doing too much. Here are ways to save time without sacrificing quality setups.

Check out my 14 tips for handling market selloffs on Bullsonwallstreet.com

1. Run fewer scans

Many traders see scanning as the holy grail, and cutting down on scans seems counter to the idea of saving time since scanning is supposed to narrow the universe of stocks to trade. I disagree. There are a number of problems created by scanning.

When we scan, we often lose our "feel for the market" because we are focused on the "now" and haven't participated in the day to day of the stock.

Many traders don't actually understand how to trade what they scan. So you've got a list of 12 stocks that broke out 5 percent on heavy volume, breaking out over a key resistance level. Now how do you trade this stock on a down trending market? What about a range bound market?

When scanning and narrowly focusing on specific setups, we often lose many potential setups. Stocks go through cycles. A parabolic short often leads to a bounce, which may lead to a failed breakout, which leads to a first thrust short, which  leads to another bounce and finally developing a second thrust short. You will get a better feel for this if you have been watching the stock throughout the cycle.

The number one question I am asked is "what scans do I run". Most traders are shocked when I tell them I only scan 5% breakouts and breakdowns and a scan for overbought and oversold stocks. Every other stock in my watchlist comes from my weekly and daily sector analysis. 

Scanning for stocks to put in my watchlist takes 5 minutes per day.

2. Weed out your watchlist every day.

I keep to lists. A watchlist which consists of 50-200 stocks and a narrower focus list with actionable setups, which usually has 5-20 stocks. Every evening I review my lists and weed out stocks that are no longer setting up.

Why is weeding the watchlist important?

First, it is a time saver. You no longer are wasting time on what is no longer a strong setup. Second, I see many traders trade bad setups because that stock was still in their watchlist. Weeding out the stock makes sure you do not trade average or poor setups.

Weeding and reviewing the watchlist takes 10 minutes.

3. Review the top and bottom performing sectors weekly.

My weekly sector analysis is the biggest reason I don't need to run scans. I review the best and worst sectors every weekend for two reasons. First, it helps me develop a feel for the market and what is trending. Second, I know the best and worst stocks, along with the most volatile, are in my watchlist.

Sector review takes about 10 minutes per day.

4. Create a daily focus list.

Once I have run my two scans, weeded out my watchlist and analyzed the best and worst performing sectors, the final step is to create my focus list.

The focus list narrows the watchlist that has developed from setups 1 though 3 with actionable stocks that are setting up for possible trades over the next day or two. It's a lightening quick process. Once you have seen a setup hundreds and even thousands of time, you develop a sixth sense for pattern recognition.

Reviewing 100-200 charts to create my focus list takes me less than 5 minutes.

5. Create the plan

Now that you have a focus list, you need to know the entry trigger, stop and target placement. Having a plan leads to better decision making when it's time to enter.

Created a trading plan for each stock in the focus list takes 5 minutes.

My daily "process" for identifying the stocks I will trade is organic and builds on itself day after day. This process gives me an intuitive feel for the market, cuts down on waste, identifies the high quality setups I should be trading and keeps me focused. Best of all, it only takes 30-40 minutes per day to have a professional's understanding of the market.

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Sector Snapshot

Only 28 out of the 239 sectors Morningstar tracks were in positive territory over the past week. Out of those 28, only 7 were up over 1 percent. Here's the list:



Not many have good looking charts. Tobacco is showing nice underlying volume. Regional and Pacific banks also have decent charts. The rest are bounces off downtrends.

Overbought Sectors

Here is a list of sectors with the highest stochastic readings. I use this information for three setups:

1. To find sectors with good chart patterns and await a pullback for entry

2. Find sectors with bad chart patterns that are bouncing to resistance and ready to short.

3. Find topping patterns in overheated sectors.

Sector Analysis: Discount Variety Stores

As many of you know, I usually spend Sunday evening analyzing sectors and the hot stocks within those groups. Due to time constraints I've been skipping this watchlist ritual, instead only trading stocks that I find through my scans.

I had some free time today and was surprised to see Discount Variety Stores among the top of "sectors making 52 week highs" list. I should not have missed this and will go back to my Sunday ritual this weekend. Now lets look at Discount Variety Stores:



The sector action looks great. Price is pulling back from all time highs in an orderly fashion. The moving averages are all moving up and, not seen on this chart, volume is confirming the trend.

There are twelve stocks in this group, and nine are within 70 percent of their 52 week highs. Here are my favorites:

BJ: Stick with the trend and buy pullbacks



COST: It's dropped below the 50 day moving average, so I would not buy here. However, a dip to the 200 day MA would provide a low risk entry. I haven't shown it here, but Costco has been an excellent deep pullback play since 2004.



BIG: Watch for a pullback to the 30 breakout level.



WMT: Already pulled back to support. Low risk entry with good volume pattern.

Sectors Nearest New Highs

Here is a list of sectors ranked according to "percent of 52 week high".
























Most sectors on this list will come as no surprise. However, "regional southwest banks" threw me for a loop. I dug deeper and looked at individual stocks and did not find one that I'd put on my watchlist. Some had decent price patterns, but not enough solid volume.

I still like many of the commodity sectors that top the list, but won't get involved until there is a pullback (which some sectors, like steel, seem to be starting).

Time to Reload Shorts?

Some beaten sectors have retraced to levels that make for attractive short entries. High on my list is education services.














As for individual stocks, my watchlist includes CPLA, APOL, DV, EDU, LTRE and CECO.

Homebuilders are Hard to Ignore

It's tough to ignore the strong move in residential construction, aka, homebuilders. While my head tells me to stay away, the charts tell me otherwise. For months I have been using bounces in the sector to reload shorts, but not this time. There is something different about this bounce.

Take a look at the chart of Toll Brothers. A few things jump out at me:

1. The stock is no longer trending down. Rather, we see a range bound price movements with resistance around 24.

2. RSI is improved. The mid level is acting as support, which is what happens in strong stocks.

3. OBV is improving. Volume patterns seem to be shifting from sell to buy.



I would not buy here. In a range bound market, I like to make buys at the bottom of the range or on breakout. A patient well timed entry could lead to nice profits in TOL.

Sector Volume and Market Notes

One of two things will happen this week. Either we get a major decline or that capitulation move that everybody has been waiting for will lead to a nice bounce. I have no idea what will happen, but I am positioning myself for either outcome.

Here is a list of sectors showing strong positive volume. A few surprised me.

6 Bullish Metal and Mining Stocks

Surveying the top sectors over the past week, I see a number of bullish charts in the metal and mining complex. The six charts that I will be watching next week are CLF, MTL, SID, ZEUS, CENX and JRCC.

Today's Hot Sector: Agriculture

Yesterday it was the financials and real estate, and today the hot sector was agriculture. Great move if you caught it. Now the million dollar question is whether this move was due to short covering or the start of a reversal that will resume the sector uptrend. More to the point, should we hitch on for a ride, short or just stand back and watch.

There are too many "ifs" to make a convincing long or short argument. The longs can say that most stocks have remounted the 50 day moving average and still remain in a long term uptrend. However, bears can point to volume and short covering.

That's why I don't plan to make any trades in this sector. However, if the stocks breakout to new highs, I will likely enter. And if they break down below the 50 day moving average, we will have a short signal.

I was going to post charts of my favorite Ag plays, including MON, CF, AGU and TRA, but there is no need to post more than one. They all look almost exacly the same.

Sector Review

Here are the top performing sectors last week. There isn't much that has me excited here. Most of them were bounces from some of the worst industries over the past few months, like mortgage, cement and building materials.



One sector I do like is Ag Chemicals.

Sector Review: Where Have the Momentum Sectors Gone?

As usual, I went over the this past week's top and bottom peforming sectors. Most of the sectors that performed well do not look good as longs. This is not a good sign for the market. At best, it signals new leaders are emerging. Worst case scenario is that most sectors, along with the market, are rolling over and ready to make another leg down.

Regional Airlines is an example of a sector that performed well last week, but is not a long candidate. Not much to look at, eh? It actually looks good as a short, with price pulling back up to resistance in the nidst of a downtrend.



Here are the top performing sectors for the week:



And the worst, which features many of the year's best performers:



Don't forget, I'll be posting answers to your questions later this week. Ask me anything. Send your questions to: SinghJD1@aol.com

Sector Review

This was not a great week for the market. We still don't know if the character of this bull market has changed or it was just a natural correction. Either way, after a negative week, it pays to make note of what is working.

During a week where every major index was significantly down, lead by the Nasdaq at -6.5 percent, only 24 of 239 Industry groups were positive. My current favorites are Internet Providers, Oil and Gas, Industrial Equipment, Dairy Products, Silver, Gold and Ag Chemicals.

10 Sectors to Play if You are a Bull

Here are the best performing sectors over the past week. If we get a signal to go long, these are the sectors you want to put in play.



On Thursday I put forth a short strategy that attacks momentum stocks that are extended, handled Thursday's correction poorly, and fail to mount there highs in the near future. You can bet I will avoid stocks from these 10 sectors if I apply a short strategy. Amazingly, 9 of these 10 sectors were up on Thursday. Only copper in the red, though it did rally away from the lows of the day.

August Sector Review

It's a good idea to keep tabs on what's working and what's not, so at the end of every month I do a sector review. Here are the top and bottom twenty for August.

Bottom 20 Sectors:

Top 20 Sectors:

Many of the top performing sectors are coming off down moves and may actually be good short candidates. One sector that is breaking out to new highs is internet service providers:

Four Reasons to Sell Steel

The steel sector, which has been one of my favorites over the past year, has undergone a change in character that now puts it on my "short watchlist." Four elements make it an attractive short:

1. Signs of distribution, with high volume down days accompanied by low volume updays.

2. Break of the 200 day moving average, which had previously acted as a loose trendline.

3. Change in character of the stochastic indicator. During the trend, oversold levels were bought up right away, with the indicator spending little time in the bottom half of the chart. Current levels have remained oversold since late July.

4. Breakdowns in sector leaders such as MT, STLD, X and RIO.

A bounce towards the 200 day moving average may provide an opportune time to short stocks within the sector.

Video: Sector Review

Video: Sector Analysis




http://one.revver.com/watch/312529/flv/affiliate/93676



Video Summary:

When the market has a bad week, I like to focus on sectors that held up well. This week there were 17 sectors that posted one percent or more gains. Of these sectors, the ones that interest me are: industrial equipment, internet information, ag chemicals, oil and gas drilling and wholesale. All of these sectors have been trending up over the past 6 months, and recently brokeout over resistance levels. I am looking for pullbacks in each of these sectors.

Sector Review

Monday morning I will post a video webcast featuring my analysis of the top performing sectors last week. Here is a quick summary.

When the market has a bad week, I like to focus on sectors that held up well. This week there were 17 sectors that posted one percent or more gains. Of these sectors, the ones that interest me are: industrial equipment, internet information, ag chemicals, oil and gas drilling and wholesale. All of these sectors have been trending up over the past 6 months, and recently brokeout over resistance levels. I am looking for pullbacks in each of these sectors.

CTRP and Oil Stocks

There is a good chance I will take a position in CTRP tomorrow:


In yesterday's video webcast, I mentioned that I liked independent oil and gas, along with oil refiners. These five stocks made my "oil" watchlist: WNR, NFX, KWK, DNR and IOC.

Video: Sector Review

In today's video webcast, I review the top 10 performing sectors over the past month and show how I decide which sectors to further investigate. Sectors that interest me include: independent oil and gas, oil and gas refining, nonmetallic mining and gaming activities.



http://one.revver.com/watch/297440/flv/affiliate/93676

I would appreciate any feedback you may have, as this is my first attempt at producing a webcast. Please leave a comment or e-mail at SinghJD1@aol.com if you have any tips, suggestions, or just want to stoke my ego ;)