Top Swing Trading Entry Points – Part 2
In the last blog post, we talked about what you can do if you miss an ideal technical entry point on a great stock. How the 1-2-3 trend change can be a very good secondary entry point out of a strong bottoming pattern on a top growth stock when swing trading.
We look for these on great stocks in long-term up-trends around or above a rising 200 day moving average. This generally reduces overhead resistance. Overhead resistance can make a move higher very choppy which forces a wider stop-loss and actually yields a lower win rate on a swing trade.
In the stock market, as in life, winners tend to keep winning and trending higher. Stocks in a sideways or a long-term downtrend tend to continue to trend lower over the long-term. Not always, of course, but that is the tendency that we can use to our advantage when swing trading.
Again, I only look for a good secondary entry point on stocks that are displaying the home run potential based on the initial price action. The fundamental factors, such as undervaluation or strong/accelerating growth, need to be present as well.
Another good secondary entry point is a pullback to either the 9 EMA or 20 EMA followed by a strong rebound developing on a daily candlestick chart or even a 1 hour chart. So a bullish candlestick pattern off one of these moving averages.
Another good secondary entry is a long, narrow flag pattern on a 1 hour chart followed by a break to new highs with a kick off a key moving like the 9 EMA on a daily chart.
Again, most are not worth chasing for a secondary entry point. Just the ones with the very strong first move and good price action from there such as the price action outlined above.
Here is a good example from another trading opportunity featured to our clients recently. Like TTD, its another stock featured over the past month that moved over 35% within a few weeks after featuring it on the subscription site. This other stock is EHTH.
Now EHTH was in a bullish symmetrical triangle pattern with very good symmetry. Its always best to find these within very entrenched long-term up-trends. Again, winners tend to keep winning in life and in the stock market.
Healthcare stocks were just starting to recover after the sector was hit by talk of major regulatory changes early in the presidential primaries. EHTH held its very well-formed symmetrical triangle consolidation which is a good sign and was nearing the technical entry point. Here is how it looked when we featured it to clients in late May.
EHTH reached our target entry point which was a close above the top trend-line in the pattern soon after featuring it to customers. It then consolidated for a few days before rising sharply 4 trading days later.
After the stock moved about 10% higher it was time to put this on our radar for a secondary entry point. The long-term trend was very strong, the pattern well formed and the fundamental factors were rapidly improving as well. The average analyst price target was still well above the current price which is a good sign as well.
Soon after the 10%+ move higher, the price pulled back to test the 20 EMA and then closed above the prior days high the next day. A move above that days high would have been another good entry point while stopping below the prior swing low – just below $65.73.
Once a top trading opportunity breaks out to new highs it often pulls back one more time before making a larger move. EHTH pulled back a little below the 20 EMA before rebounding sharply later in the day to close well above it. It then formed a tight flag pattern on a 1 hour chart.
One of the principles we like to use when swing trading is multiple time-frame analysis. In this case, starting with a multi-year chart to spot the entrenched long-term trend. We then spot the bullish consolidation pattern and entry point. Then we look at shorter-term charts, in this case 1 hour candlestick charts, to look for a good secondary swing trading entry point.
One of the lessons here is to stick with a stock that is acting well and look for other good swing trading opportunities in the future. This stock presented multiple good swing trading opportunities and even day trading opportunities near the swing trading entry point.
And, as mentioned in the first part of this series, the other lesson is key as well. Just because you missed the initial technical entry point does not mean all is lost. In fact, a good secondary entry point can often offer better gains per day as in the case of EHTH and TTD.
