- Are there a lot of stocks in similar sectors? Take a look at today’s Nasdaq 52 week high list – what jumps out to me is the high number of communication companies like SONS, WIN, DTV, ALSK, etc. that are strong right now. If you find a sector heavily representated, go check out the weekly and daily charts. Look for resistance levels. Sometimes you’ll discover that they are all hitting resistance levels on the weekly. Take a look at the weekly for ADM, for example. Dating back to 2006, you’ll notice that this level (around $32) has been a point of momentum reversal. ADM, in this case, may need to move through $33 to confirm resistance has been broken and new highs are in the future.. that’s your swing. Before then, I would be cautious.
- Speaking of resistance, do a quick spot check across a lot of the 52 weekers. If you see a lot of stocks at resistance on the weekly charts, we need to be careful – a lot of energy will be necessary to take the entire market through resistance.
- Find great stocks that have steadily moved up and look for pullback entries. Often times these runners will pull back to some level of support and new buyers will come in to continue the trend higher.
Swing trading is very difficult right now, but a great way to find swings is to spend time on the 52 week high list. Check out VWM – you talk about an amazing swing trade. First, start with the weekly. Wow, it was $20 in 2009 and now it’s $85. Now look at the daily. What do you see? Pullbacks on what is an obvious up trend. Why fight it? Until it doesn’t work, it’s a good swinger. However, the entry is key. For VMW, SMA50 is a reasonable area to consider adding long. Most pullbacks have seen SMA50 with fake breakdowns below. So, as an example strategy, toss VMW on your alert list and get interested again when it’s at SMA50. Then evaluate the situation. You may have a great swing that could last a few days to weeks. FFIV and ARUN – same story.
Others to look at for similar types of trades: CRM – an uptrend stock that would be a possible long candidate at SMA50 or 102.50 based on the daily chart.
So, if you’re looking for swings, take a look at the 52 week high list. This is an approach many use to make sure they are trading sector leaders and market movers. Always consult a few others in the sector and look at weekly resistance levels. It will allow you to evaluate risk and upside potential.