Swing Trading a Trending Market in 2024

 

A market trending into new highs can favor different exit strategies than a bear market or market in a correction.

 

Today, we will go over the ever shifting market environment and what is working in early 2024.

 

New Highs are Good…  When Trading at least

 

The effectiveness of certain trading strategies tends to shift once the major indices get to within about 10% of the all-time highs.  Not having overhead resistance is better when trading a stock as discussed in a prior blog post.  Its even better when the overall market is also not running into overhead resistance.

 

Within about 30% of the highs, stocks tend to have more “cleaner” moves once they reach a good technical entry point with a catalyst.  Cleaner meaning the stock will tend to hold a tighter stop-loss below the technical entry point more often.

 

This is especially true when the overall market averages are not being knocked down as well as they reach resistance levels.  So a market trending into highs is a good environment for swing trading.

 

During a correction (when the market averages are more than 10% below the highs), you often have to target a lower profit and tighten your stop.  We also like to see a big catalyst just before the stock reaches the entry point to overpower resistance.

 

A big catalyst that is better than expected which is pretty straightforward to measure in the case of trading big earnings beats.

 

So one of the trends we are seeing right now is, well…., better trends.  In other words, more stocks are reaching a good technical entry point near new highs and trending higher without going much below a 10 day or 20 day moving average before making a much larger move.

 

Biggest Swing Trading Winners So Far have No Overhead Resistance

 

Some good examples of this on stocks recently featured on the blog are SMCI, NVDA, POWL and APP.  The first 3 trended strongly into new highs out of bullish consolidation patterns on very bullish news.  Most of them look ready for a consolidation right now except for APP.

 

Since appearing on the blog over the past couple months, SMCI ran 150% within 5 weeks, POWL ran more than 50% within a few weeks, NVDA has made about a 50% move higher and APP is just getting started.  All 4 made a much larger move from the entry trigger listed in the daily alert service.

 

The best performers near new highs all held a very tight stop-loss below a good technical entry point such as an earnings flag breakout.

 

Notice how APP has overhead resistance going back a couple years while the other 3 do not.  Its also off to the slowest start.  PLTR has disappointed so far and it also has overhead resistance going back a couple years.  So does NFLX although its picking up the pace now as it closes in on the all-time high.

 

When trading, its all about returns per unit time.  With no overhead resistance, the gains tend to come quicker all else being equal which is what we want when swing trading.

 

So one of the biggest shifts in the market environment in early 2024 is that we are suddenly seeing more stocks hold above key moving averages if they are breaking into new highs.  So the approach of holding more shares until the price closes below, say the 20 day moving average, and then place a stop a little below that days low has been working well when swing trading the ones that get off to the best start.

 

Its just the opposite once the market averages start to go into a correction or bear market (which is worse) because of the increased volatility in bear markets and corrections.  One of the big advantages of trading is risk management and we have to keep losses small or risk a larger drawdown.  This is a little more of a concern when you have market and stock specific overhead resistance.

 

Earnings Wildcards

 

Earlier in earnings season we saw a real divergence between the great reports and poor earnings reports.  Some great stocks would gap much higher after earnings while others would gap much lower after earnings.

 

Great stocks like PANW, MNDY, SNOW, MDB and many others were pancaked after earnings with drops of 15% to 25% or more right after the earnings report.  This is why we have been avoiding holding most trading positions through earnings.

 

Long-term investors in the soft landing camp can just treat this as noise.  But when swing trading, we care more about the current market trend.  If the economy goes into recession and the market starts to trend lower, we can begin to trade the market to the downside.

 

Big Earnings Sleeper Stocks

 

The good news is that many great stocks are rebounding right away after an initial post-earnings selloff.  Another good example last week was CELH which gapped much lower after earnings on Thursday morning right after earnings.  It then rallied hard later that day.

 

Again, like SMCI and POWL, the break out of the consolidation on good earnings news was a great entry point.  The other technical entry points just did not have the fresh catalyst to really ignite a rally and strong move higher.  So having the price alert at the technical entry point is paramount when swing trading as is checking your watch list daily for new news.

 

Other great stocks are having muted reactions initially after earnings before springing to life days or weeks later.  ELF is another example where a great report was met with not much investor enthusiasm initially.

 

But once it broke out of its earnings flag and darvas box, the stock took off again and ran another 20% quickly.  So keep an eye out for a delayed reaction after a great earnings report on a top stock in your watch list.

 

All of these big moves arguably have another factor in common.  Growth at a reasonable price.  The garp trade has been doing very well in 2024 so far.

 

For Those Using Ranking Strategies

 

The 3 stocks to wealth strategy is having another great start to a new year in 2024.  It tends to perform very well in trending markets that are near or above new highs and we will see record performance for the strategy at the current pace in 2024.

 

Again, with ranking strategies its important to keep in mind that stocks can run further than you think if the valuation is justifiable.  Most great stocks are a bit expensive but there is a fine line between expensive and ridiculous.

 

But ranking strategies with a garp (growth at a reasonable price) factor in the ranking system have been very attractive so far in 2024.

 

Have Big Earnings Breakouts on Your Radar

 

Big earnings breakouts like POWL, SMCI and others this quarter have been a must see right after the report.

 

On Investtobefree.com, we have a new library of videos going over some of our tips and tactics for riding a big earnings breakout.  Every week during earnings season, we also add another video often covering one or more big earnings breakouts that occurred that week.

 

We had a video on SMCI, POWL and others right after the explosive breakout before they ran much higher.

 

Here are a few of the recent videos offered in the new service covering big recent earnings breakouts so you can learn more about them before it was too late.

 

 

 

 

Taking Advantage of a Trending Market

 

Our sister site, investtobefree.com, has a free training series where you can start to understand the ins and outs of this strategy that can save you a LOT of time trading with long-term results that speak for themselves.

 

The new moving average stop-loss strategy would have gotten you out of stocks with a smaller drawdown than the Nsadaq in 2022 and one that about matched the S&P 500 drawdown in 2022.

 

This new stop-loss strategy, introduced last July, allows us to use the strategy with much more peace of mind and confidence when riding the ups and downs in the market.  In fact, we are now using the strategy in 2 of our accounts after the great results in the first 11.5 years.

 

Its a great strategy you can start to learn and use yourself using the free video series and is perfect for those who work full time and want to swing trade.

 

Or, you can have someone with 15+ years experience swing trading deliver the top 3 stocks each week with the service offered on investtobefree.com.  You can mix and match our stocks with your own top 3 list.

 

You also have massive earnings breakouts you can ride each quarter such as SMCI, NVDA, POWL, ANF and others that made incredible moves after appearing in the weekly video series that comes with the subscription.

 

But the free video series is a real eye-opener for most traders looking for a more focused, effective and simpler trading strategy they can execute on just 1 day per week.

 

 

A Simple Yet Proven Ranking Strategy – the Free Video Course on Our Sister Site