, LLC, Investment Advisory Services, Cary, NC

The Perfect Swing Trading Setup


This is the ideal swing trading setup we look for in our newsletter and in our personal trading. When we wrote our first book on our swing trading style back in 2004, we gave an example of this setup found on the day we wrote that section of the book. On the chart below you can see the long-term, consistent uptrend in the stock with the well-formed consolidations we talk about in our newsletter. Volume was building as the price was breaking its downtrend.

A couple months later after the book was published, we looked back and found that the stock had made a huge move to the upside. The first time we had checked the stocks performance since putting the trading setup into the book before it made its move. It was the perfect swing trade. The kind of swing trading opportunity and chart pattern that gets us excited every time we see it. If you like to make money in the market trading stocks, this is a great setup that continues to work well.

Example of the Perfect Swing Trading Setup

Below is another classic swing trading setup published in our Daily Alert newletter on February 3rd, 2010. At the time this was one of the top Chinese growth stocks in the market. Although the Chinese government had raised rates and bank reserve requirements, the market reaction was harsh, setting up this opportunity.

This stock had proven huge sales and earnings growth, a high return on equity and several other characteristics establishing it as one of the premiere growth stocks at the time. And the technicals were just about perfect. A strong long-term uptrend, a well-formed pullback had taken the stock back to its uptrend support, and key technical metrics were moving out of oversold levels without the uptrend being broken. It was a perfect entry point for this swing trade. The stock was featured in our Daily Alert newsletter on February 3rd before the stock doubled in price in about a month!

Example of the Perfect Stock Trading Setup After

Of course, not all of these setups will make this kind of move so quickly, but this culmination of factors outlined above and in our book normally yields big gains in short order. As long as either the earnings estimates are trending strongly higher and the company tends to beat those estimates. Or, the stock is a premiere growth stock in the market based on a strict set of criteria including very strong and sustained earnings and sales growth, insider buying or strong insider ownership, a high return on equity among other key predictive fundamental factors. Very few of these technical trading setups have these fundamental characteristics. So you may find this technical setup in a lesser stock, but its less likely to make a sizable move in our opinion.

Our experience shows that you need both proven fundamentals and a strong technical setup to justify putting your hard-earned money to work. You need to spend the time to look far and wide to find these swing trade setups. Our service saves your valuable time and teaches you how to find and trade these big profit-making opportunities. You will find many of these perfect setups with both the right fundamentals and technicals in our newsletter over time. One of the first ones featured in our Daily Alert newsletter this year nearly doubled in price within a month as shown above. And this was not a risky and speculative penny stock either. It was a stock with proven sales and earnings growth. One of the top growth stocks in the market. You will find many similar setups when you take our free 3 week trial of our newsletter to get on board one of these rocket ships before they take off. Its a lot of fun.

The example above is also considered a channeling stock. In this case, the channel has an upward slope which is ideal as long as the trend higher is sustainable given the underlying fundamentals. Other trading setups featured in our newsletter are in a horizontal channel. These are often very profitable as well. But, again, key fundamental metrics must also be present and only a small percentage of stocks have these improving fundamental characteristics. Fortunately, we find many of these classic channeling stock opportunities each week in the Daily Alert.

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The Perfect Momentum Trading Setup

Along with swing trading opportunities, we are also constantly on the lookout for great momentum trading setups on top growth stocks. Again, we look for only those stocks with rapidly improving fundamentals. These stocks fall into a couple categories:

1. Where analysts are tripping over each other to be the next one to raise estimates and the company has a tendency to beat these estimates. Where the underlying value of the company is increasing due to better-than-expected results and consensus estimate increases.

2. Companies that are increasing sales and estimates at a very fast clip. With several other key fundamental metrics that are very bullish. In short, the top growth stocks in the market.

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