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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Monday, October 27, 2014

How I Am Trading Energy: A Short Setup

Swing traders must have a basket of setups in order to trade consistently and successfully.  One of my favorite setups is the "rubber band" short setup.  $XLE is a good example of this setup.

Trade Report members were alerted to this trade when I made it and again when I took partial profits this morning on the gap down. The stop has been moved up, essentially making the rest of this trade a "free ride".  My target now is a retest of the lows.


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Friday, October 24, 2014

Using Sector Analysis For Trades and Finding Good Stocks

Swing traders need to know where money is flowing, and the easiest way to do that is continually analyze strong and weak sectors.  Currently while in the midst of a tough market, biotechnology is breaking out to new highs.  That is where the smart money resides.

There are two ways to play this.  First is to look for a good entry into a biotechnology ETF like IBB or BIB, likely on pullback to the breakout level.  Second is to move to individual stocks and pick a stocks with the best setups for long entry.

I will watch how IBB handles a retest of the old high at $280 for a trade entry.


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Tuesday, October 21, 2014

Earnings Breakout Chart of the Day: HOG

It is crucial for the part-time trader and swing traders to have a basket of "go-to" setups.  One of my favorites is the "earnings breakout" setup.

Today, HOG (Harley Davidson) posted knock out earnings, which caused price to gap up over a downtrend and the 50 day moving average.  This could be the catalyst it need to test the old highs.


Tuesday, October 14, 2014

Chart of the Day: TWTR

It's a volatile market for swing traders and just about every index and sector is in a confirmed downtrend.  However, TWTR (Twitter) has held up strong and after two days of weakness has formed a hammer candle right around two areas of strong support.

Hammers near support are often excellent entries off breakout-pullbacks, however in this market I would exercise extreme caution.  I have not even included this setup in the Trade Report.


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Friday, October 10, 2014

Chart of the Day: EXAS

As a swing trader, whenever I see a day that is down big I look for stocks that are breaking out strong.  Today the stock market and just about every stock is getting hammered, but EXAS broke out on strong volume to new highs.  

This is a stock I will add to my watch list and monitor in the coming days for optimal entry.


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Thursday, October 09, 2014

Chart of the day: PANW

Yesterday I entered PANW as a swing trade based off the strong closing hammer that printed after a support violaiton.

While the market tanked today, and took just about every stock with it, PANW actually was up slightly.  This market has shown respect to stocks like PANW that have strong price and volume patterns.  This is the type of stock that could really move if and when the market regains it's footing.

The key theme to think about when looking for longs in this market is relative strength.