Swinging for a Trade.

You will often see traders get really excited about a stock when there is an extended price move.  Usually it comes int he form of an expanding price bar with no tails.  Just a big up day. General bullish sentiment may be fueling the move, underlying fundamentals, but what ever the case a swing trade is about momentum and when it stops.

Set ups for swing trades leave certain finger prints.  Lets talk about them. 

First the move begins with a move out of congestion.  The congestion is generally a time when the bulls or the bears are fighting for territory.  Then a bust of price action occurs and sends the price out of congestion and breaks above. 

Second  a big moves begins and there is usually 3-7 consecutive days of big price action. 

Thirds is the stalling of the move that is initiated by usually a small doji.


Cermer Corp last week had this set up.



With the move up from $80 to $86 it moved out of the congestion between $76 and $78.
It then had  a 3 day move where the open was just above the previous close and the price action was expanding rapidly.  Then the doji appears.

Now if you are willing to take a little bit of a risk, you could enter on the doji or wait for confirmation.

Since that doji formed last week Cerner has dropped about $9 in 4 days.



Now the set up does not work all the time, but certianly can increase the probability that the trade will work.  The key to this kind of trade is the big price action, the 3 or more days consecutive days up and the doji at the top.

SPY had a similiar pattern last week as well.




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Disclaimer: This article is intended to be informative and does not constitute a buy, hold, or sell recommendation., and should not be construed as personalized advice as it does not take into account your specific situation or objectives