Swing Trading and momentum investing stock pick newsletter and swing trading service.
Good evening StockBandits!
The indexes went green this morning as they stretched into their third consecutive advance, but the enthusiasm fizzled and the highs of the session were set within 75 minutes of the opening bell. From there, [Read more…]
Looking in the rear view mirror on occasion can be helpful, not just in life but in your trading as well! Don’t live in the past or dwell on it, but review it from time to time for the lessons it will no doubt offer.
When doing so, try to find some common themes for what’s working well, and what is not. Understanding the kinds of plays to seek more of or to avoid helps you stay on the right track.
I wanted today to look back on some of the single-day plays from last month which worked out well (swings are updated here). I like to trade on both the day and swing timeframe, so these single-day plays are in my view the cashflow trades which get me through the week – especially during April when the broad market was so choppy and therefore fewer swing trades surfaced.
The idea isn’t to jump into and out of trades like a maniac! Rather, the daily charts on these had them looking ripe for a move, but not as multi-day swings. By grabbing them for trades lasting from a few minutes to a few hours, there was some good opportunity to capitalize on without incurring much risk at all. In fact, on nearly all my single-day trades, I’m only risking 1% from my entry, which keeps losses small when they happen and allows for a nice multiple of that on the profit side when trades get going.
These kinds of trades are shared nightly with Bandit members, and I tend to turn to them when I don’t trust the chart or the market for a lasting move, or when the bases are too loose to justify a much wider swing stop. Once in, I look to ride any existing momentum or follow through by way of the intraday chart.
Understand that although the charts below highlight winners, I do take plenty of losing trades. Those of you who read my posts know the importance I place on losing properly, as losing trades are part of trading. By sharing the charts below, my aim is to shine some light on the best kinds of plays working for me lately.
This is not a comprehensive list at all, as there were many trades in the 1-3% range which added up nicely. But this will give you a snapshot of the kinds of plays I take for the single-day timeframe.
April:
The best plays lately on the long side have largely been buys after pullbacks, while the short side has offered some nice failed bounces as well as breakdowns through lateral support levels.
You could be making more from your trading! If these are the kinds of plays you like to take, now you know where to find them.
I dig out the best setups in the market each day, structure my trading plan for the following session, then share those trades with members via the nightly report. They include swing trades and single-day trades like those above. Not only am I explaining where I’m looking to trade them, but I also explain why I’m looking to trade them.
If you’re not a member, why not give it a try today?
Trade Like a Bandit!
Jeff White
Take a trial to the Stock Pick Service to get my trades.
Good evening StockBandits!
The DJIA and S&P 500 each broke out to new all-time closing highs today, finally clearing their respective resistance zones which have plagued them in recent months [Read more…]
Happy Mother’s Day StockBandits!
On Friday we saw the S&P and Dow each close just a short distance from where they finished the previous week. The S&P really typified the week with 5 bars on the daily chart of alternating colors: green/red/green/red/green [Read more…]
The wait for direction continued last week with the senior DJIA and S&P 500 each finishing again right near resistance while the more speculative NAZ and RUT ended the week not far from their respective correction lows. Eventually, one side will pull the other along with it, but for now the jury’s still out.
As we head into a new week of trading, it’s time once again to take a look at the indexes and the key levels they’re dealing with. This will impact how individual names move, so it’s where every new trading week should begin.
NAZ – The NAZ has lower highs and higher lows over just the past few weeks, so buyers are getting a bit more aggressive on dips and sellers are staying aggressive on bounces. Eventually, we’ll see one side win out with either a breakdown or a higher high.
SP500 – The S&P has repeatedly cleared 1883 on an incremental basis, with each break having failed right afterward. This week, it will have another chance, so we’ll see how a breakout gets treated if it occurs. An immediate new high (within 2 days or so) would be expected on any meaningful break above this major resistance area.
RUT – The RUT neared major support last week and held, but still has a bearish bias with all the lower highs it has created in the last two months. That needs to change before a bullish bias should be embraced.
DJIA – The DJIA is facing a potential breakout here once again, but likely needs other indexes to exhibit strength in order for a push through to stick. It’s decision time yet again. An upside resolution could bring a 550-point measured move out of this multi-month trading range.
Trade Like a Bandit!
Jeff White
Take a trial to the Stock Pick Service to get my trades.
Follow @TheStockBandit on Twitter
Good evening StockBandits!
Welcome to this week’s Charts on Demand video where I share my thoughts on your charts! Through this weekly feature, my aim is to provide you with some deeper education to improve your chart-reading skills as you stay objective and identify areas of support, resistance, momentum or apathy on the charts. [Read more…]
Every week, I get an email along the lines of:
Jeff, I’m looking at XYZ for a short at channel resistance – what do you think of this play?
I’m happy to discuss potential plays in this way with Bandits, as it’s one of the ways I try to help them. The short answer is that it depends on the channel.
Channeling stocks can offer some good plays, no question about it. That’s especially true if you’re patient enough to wait for an often-choppy move to develop. The very nature of a trading range is that price lacks momentum, so lasting moves are inherently hard to come by.
In tilted channels (rising channels or descending channels), I want to trade in the direction of the overall movement. So in an ascending channel pattern, I want to look for spots to get long against support and look to lighten up as price approaches the upper end of the channel. In a descending channel pattern, I want to look for spots to get short against upper resistance and aim to cover as price nears the lower end of the channel. Why not trade with the wind at my back?
But in lateral channels, it’s certainly a fair question to ask which side makes the most sense – long or short?
Personally, I’ve found that in lateral ranges it still pays to defer to the existing trend. Even if price has been somewhat stagnant in recent days or weeks, a steady uptrend over the past several months still shows that the buyers are in control (and vice-versa in a downtrend). The news flow also tends to perpetuate existing trends, so I keep that in mind as well.
Take LUV, for example, as it is right now. Here’s the chart, along with some comments on it below:
Price has trended higher now for 8 months and counting. Over the past several weeks, it has carved out a well-defined trading range and currently sits at the top end of that range.
Yes, there’s certainly a chance that price retreats back down toward the $22.35 support area, but it’s also just a short distance from breakout territory. That’s a favorable reward:risk ratio of about 3:1, but the end result is that I’d still be shorting a stock within an uptrend. That just isn’t my preferred play. I’d rather see an existing downtrend or lateral trend before considering a short against this kind of upper resistance.
One other item about trading within channels is that I never count on a move all the way to the edge of the range. Instead, I want to see a move which nears the boundary and therefore look to make an exit prior to then. Often that’s 1% or so from the actual trend line. Because reversals are common within channels and ranges, if I’ve caught the bulk of the move then it’s time to book it and move on.
Trade Like a Bandit!
Jeff White
Take a trial to the Stock Pick Service to get my trades.
Follow @TheStockBandit on Twitter
Good evening StockBandits!
The indexes finished the day split [Read more…]
When it comes to intraday trades (or single-day trades), traders have a tendency to think differently.
Maybe it’s the more-frequent painting of bars on the chart that affects them, or they’re jumping to conclusions based on the moment by moment price quotes, or that time-and-sales window is humming along so fast that some focus gets lost.
Whatever it may be, it can lead to mistakes – particularly in terms of what’s being risked and what’s being expected on the profit side – a.k.a. the risk-to-reward ratio.
Let’s take a step back for just a moment. If I’m risking $1 to make $1, that’s an even risk:reward ratio. It’s an even-money bet. So in order to turn a profit with that approach, what absolutely must happen?
Answer: I have to be accurate.
I don’t know about you, but there are just times in my trading when I’m anything but accurate. Sure, there are times when I get hot and trade after trade goes my way. But there are also times when I zig and the market zags – that’s part of trading, too. It’s how I deal with those times that will determine how deep my account drawdowns are. The cold hard truth is that those times are very costly for those 1:1 traders.
So, since I know I won’t nail every move, the adjustment I have to make is to my risk:reward relationship. If my accuracy is closer to 50-50 (and often it is), then I need to be making more when I’m right than I’m giving back when I’m wrong. I need to book larger profits and smaller losses.
Ok, let’s get back to day trades. Just like on any other timeframe, we absolutely have to think in terms of risk vs. reward on day trades. The chart is simply zoomed in a bit and the window of opportunity (prior to the closing bell) is approaching faster, but aside from that nothing else has changed. We’re still putting capital at work in hopes of turning a profit in some multiple of what’s being risked.
My own approach is rooted in the fact that many stocks may only move 3-4% on a given day. By trading those stocks, there’s plenty of movement to grab some profit and I don’t have to expect an outsized move. I’ve found that in these cases, a 1% stop from entry is usually adequate.
In doing this, I’m allowing the trade enough freedom of movement that I’m not choking it off, and by the time that stop is reached I am usually going to have enough evidence that I’m positioned poorly and price is not moving my way.
I’m also going to be able to capture a multiple of what I’m risking if that trade does go my way to the tune of 2-4%.
There are exceptions, of course. For example, some lower-priced stocks may require a little more room (ex: $0.05 isn’t much even on a $5 stock). And there are highly volatile names where it’s not uncommon to see 6-10% moves, in which case I’m willing to offer them a bit more breathing room. Those might warrant a 2% stop from entry. But in every case, I still need to aim for that relationship of aiming for a bigger move in my favor than I’m willing to give it against me.
If you’re lacking years of experience and familiarity with the more active stocks, then one way to gauge how much room to give a position is simply by eyeballing the chart. Look at the most recent days and weeks, and see how wide the range is for a typical bar.
You can also add ATR (Average True Range) to your chart to see what size bars you might expect. For example, a $10 stock with an ATR of 1.07 means that it sees daily ranges (high-low=range) in excess of 10%, so a 2-3% stop on that kind of stock is most likely more appropriate than 1%.
Here’s what that might look like. Here’s a chart with both price and ATR plotted in the same pane, showing the Average True Range of the most recent 14 bars:
No risk/reward discussion would be complete without an exit. So when it comes to closing out a position, there are two ways I do it. The first is if I simply get stopped out, in which case I’m out all in one piece. I’m wrong, it’s time to move on.
But the second way I close out a position is if I’m right, in which case I want to be out in a couple of pieces. This is referred to as “scaling out” of a trade, and it looks like this. Price makes a favorable move from entry, momentum on the intraday chart runs a little bit hot after that nice move, and I take off half. I then adjust my stop for remaining shares, and wait. I need to see if price can digest that move and potentially reset for continuation. If it does, I’m still on for the ride, even though my position is now smaller.
By peeling off pieces of the trade, I can use that strength to my advantage and get smaller as the move gets longer in the tooth. Don’t forget the closing bell, either, which is when I want to be completely out of my day trade. But partial exits also enable me to keep participating if the move continues.
Considering these things has prompted many traders I work with to abandon their former “all in or all out” approach in favor of scaling. Taking partial profits has several advantages, and can actually improve the risk:reward relationship of the trade by the time the position is entirely closed out.
Any other methods or thoughts on this from you?
Trade Like a Bandit!
Jeff White
Take a trial to our Stock Pick Service to get our trades.
Good evening StockBandits!
Monday saw a weak start immediately followed by strength which lasted throughout the session, leaving stocks near their best levels by the closing bell. Today, we saw the complete opposite with a downside gap which never filled and a trend day lower. The S&P again failed to get free and clear of the 1883 resistance zone, and now is turning lower within the range after multiple tests of the apparently concrete ceiling. [Read more…]
