Stock Trading Basics to Swing Trading

[LiveLife]

I have been running charts on David Randolph's 3Stocks/3Pennies picks all evening.  BTW, thanks David, they are great picks!    If you haven't yet, you should check them out!

http://www.3stocksonfire.org/trading/index.php?topic=4434.0

http://www.3stocksonfire.org/trading/index.php?topic=4436.0


While looking through the charts, I realized something.  If we focus on RSI (14) and MACD bottoming, we should be able to "filter" for stocks getting ready to rebound.

Then it hit me.  I have always wondered why the moneycentral "quick & easy" filter contained winners AND losers:

http://moneycentral.msn.com/investor/finder/deluxestockscreen.aspx?query=One-Week+High-Volume+Losers&btnQryFrm=Go

Now I know.  By running the filter for stocks that are losing, you can monitor the RSI (14) and MACD activity to determine when the stock is bottoming and will rebound. 

Well, it's one more thing to consider for the mid-term template.

I am calling it quits for tonight.  Good night.

[LiveLife]

There's a lot of interest in GNBT with MBs buzzing with buy interest in anticipation of February 10th talk with FDA regarding Avian flu vaccine.

http://biz.yahoo.com/ap/060123/generex_bird_flu_vaccine.html?.v=1

The technical composite looks good with resistance set at $1.37.  If the resistance is broken, then GNBT may continue to gain short-term.

http://quotes.barchart.com/texpert.asp?sym=gnbt

[LiveLife]

There was a lot of buying pressure this morning, so I held off profit taking.  As RSI (14) is approaching 70+, I will be taking it day by day.

Also, I am considering using "stop limit sell" to execute a sell if there is a significant gain or loss.

New resistance set at $1.38 with support at $1.20.


FYI, there are some exceptions.  Take a look at AVII chart with RSI (14) way above 70-80+ and price gaining!

[nullzero]

nice job on your work long livelife, take a look at HOM the technicals look good and the fundamentals are very strong... I think HOM can pop to 6 very quickly. And perhaps you can get more detailed on the profit taking exit point... perhaps have a strategy ex. if you get 5% gain or more hold if technicals are good, but if PPS is droping to your 5% gain mark on certain techincal indicators sell. There several ways to find a good exit point I think it takes strict rules to follow and a good sense of what a gain is worth to you. I have been taking profit between the 5%-30% gain area and not looking back, of course unless the stock is shooting up faster then I can count in a 3 day period of time I will hold for a chance at a 30-50% gain but that doesnt happen often.

[LiveLife]

Thanks for the comments nullzero.

I agree.  Taking specified percentage profit and not looking back will ensure that you will get out with gains instead of losses.  Very good strategy.  I normally lean to 10% or more, but lately, I have grown very cautious and quick to take profit, and run to the next stock that's lined up.  That's why incorporating the short-term template for profit taking is essential to the mid-term to longer-term swing trading.

Also, another aspect to candle stick and chart pattern that my wife pointed out tonight is that she noticed some stocks have a pattern of gain.  An example is a stock taking three or so days of gain and taking profit.  It seemed so simple, but if this applies, then looking out for profit taking after the 3-4 days of gain would be prudent. 

As to HOM, previously, RSI (14) dipped to almost 30 before rebounding.  I think volume would be the best indicator along with confirming rebound in price and RSI (14).

[nica33]

Hi Live Life. Like always, you're contributing a lot!!! Thanks!!!

I like your idea of watch losers stocks and wait for MACD and RSI to signal for an entry point.  But it's important to look deeply how is the volume.  If it's big, maybe could tell you that it's starting a downtrend and those entry points can be not enough strong.  Big volume in uptrend, low volume in downtrend!!!! this is a key point for me

[Jimbo]

Applaud LiveLife.

Keep up the good work 

[LiveLife]

Thanks for the comments Jimbo and nica33.

Good point on volume.  I do believe current volume vs. average volume should be one of the mid-term indicators for the template (for BUY).  But keep in mind that as stocks fall, often volume increases to reflect selling activity (see HOM chart below).  The drop in price is shown in red and price gains are shown in blue.  We need to work on this indicator more.

Also, we should have "filtering" components as part of the mid-term swing trading template to identify stocks on the rebound from significant fall, such as "losers list" with MACD and RSI (14) signaling an entry with confirming rebound indicators.

As to GNBT, as anticipated, profit taking this morning.  Support is at $1.20, so profit taking shouldn't take the price below that.  What would have been even better (my backseat stock trading wife says) is to have sold yesterday above $1.30 to buy back on dip.  Dang, how can I argue with that. 

Next, we look for rebound of GNBT and if not, look at the next stock to swing trade. 


BTW, HOM RSI has turned up this morning.  If RSI (14) continues to rise, then price gain.  If you look at the chart, HOM has shown that it takes profit earlier as RSI approaches 60 instead of 70-80+.

[LiveLife]

So, how does profit taking/price correction work in practice for swing trading?

Interesting thing about profit taking/price correction is that for every share that is sold, there is a buyer who is buying that share.

Let's use GNBT as an example, so once traders who bought in below $1.00 takes profit, and new traders buy in at current price, another round of profit taking won't take place until "reasonable (10-30%+ gain)" sell targets are reached, and so is my theory.  IMHO.

The whole premise of swing trading is to ride this wave of buy/sell cycles for "actively gaining" stocks (although, swing trading can work for actively losing stocks also), and to sell on profit taking/price correction and buy back more shares on dip/rebound.  And so on.

Many stocks follow this pattern, as such, the definition of short-term swing trading is 1-3 stocks traded within 1-3 days.  If you look at GNBT's recent gain cycles, it seems to follow this theory.  Maybe my wife's observation was correct about stocks gaining in 3-4 day pattern cycles.  Hmmmm.   

Now on the flip side of the buyers, they (we) will look for this profit taking/price correction drop in price and buy on dip in anticipation of another gain cycle.   

So the challenge is how do we incorporate all these into our mid-term swing trading template? 

[MoabHQ]

Good Morning LL,
Thank You For All Your GREAT Work Here!
   My wife and I were in the Flu Swing (GNBT NVAX etc.) Trades back in Dec.
Wow what a ride! Your Stock Trading Basics have been edifying.

We go to the IBD for Long Trades and investment ideas.
TheStreet.com offers subscription services for Alan Farley with his The Daily Swing Trade
and Action Alearts from Jim Cramer. I would like to check out their Stocks under $10 & the New Breakout Stocks. Alan Farley has some good tips at his personal site link below.
We follow this board as well as BHSH and many others.
   Your current volume vs. average volume theory is the Key to the Swing In Point & Out Point. Surf the Highs & Lows. First in First Out. Learn to feel your Trader Instincts and Trade on them. Having your wife with you should double your trading confirmations.
  BTW did you get the new scottrade Pre-Post Market Upgrade? We have been using their
Trade-ideas to scan setups for swing trades.
Well thanks again!
-BPKC

Trade-ideas:
http://www.trade-ideas.com/

Alan Farley Swing Trading Site
http://hardrightedge.com/

Other Boards:
http://www.trade2win.com/
http://www.buyhigh.net/index.php

[nullzero]

HOM is approaching the 5 mark... I think we are going to see 5 today for sure....

Update:

5 was almost accomplished today in normal trading hours , a strong close at 4.98. However 5 has been hit in AH. Im expecting the next few trading sessions to be very rewarding with gains  ; the 5% gain today was just the start.

[LiveLife]

Thanks MoabHQ for your comments and sharing your resources!

I want to remind everyone that this MB thread was started for "newbies" to stock trading and to swing trading.  Many that started stock trading were overwhelmed by the vastness of information that is "over" their heads and requested "easier to understand" introduction to stock trading basics.

My continuing objective is to keep this MB thread dedicated to simple and easy methods for those that are new to stock trading.  My push for swing trading for these newbies (including this newbie  ) is so that they minimize their losses.

I have received many emails from new traders who have yet to make a profit from their stock trading, and this is disheartening!  My difficulty is to take the often complicated world of stock trading and narrow down the vastness of information and make it readily understandable and followable for new traders that I support.  So far, the short-term swing trading template has been working well for them and they are reducing their stock trading losses. 

Of course, once they establish a sound foundation of stock trading basics, they will undoubtly venture out and seek more information and resources that are available at their disposal.  MoabHQ, I still use Scottrade basic service, partly as a testament to these newbies that stock trading can be done simply with minimal amount of time and resources.

My "grandiose" attempt at writing the stock trading basics "knowledge base" has taken a back seat due to my illness and my re-thinking of these newbies who can't daytrade on margin with  limited time at their disposal.  This has allowed me to re-draft the knowledge base contents that are much more effective and easier to understand.  With the trial of the short-term swing trading template working out well, I am more eager to resume the knowledge base.

And our current project of developing an effective mid-term stock trading template is off to a good start.  Thanks for all of your input!  (I am always learning and seeking out things that actually work instead of just looking and sounding nice.)

3SOF has been a blessing with David and Frederick maintaining a community forum that benefits us individual stock traders.  Please let them know and return the favor if this website has benefitted you.

MoabHQ, hopefully other 3SOF members and visitors will share the stock trading resources they use so we can develop an effective tool to benefit those that are just getting started with stock trading with gains instead of losses. 

nullzero, as to HOM, nice rebound gain today.  It should continue to gain at least to RSI (14) 60 (instead of 70-80+ as indicated previously), but I would look out for profit taking at that point.

Take care everyone.

[LiveLife]

How can we apply technicals to stocks like TGB?

Volume and MACD?  MA?

[LiveLife]

For HOM, as indicated by short-term template, nice gain this morning.

Bought back GNBT for rebound at $1.24.

If RSI (14) rebounds, short-term gain for GNBT.

[LiveLife]

A lot of money flowing into GNTA this morning, combined with a down market this morning.

We'll see where it goes today.