Swing Trading Success and Candlestick Chart Patterns

Overview

• Discussion on how one candlestick chart pattern can boost swing trading success.
• Emphasis on the importance of timing entry and exit in trading.
• Current market challenges due to S&P 500 correction.
• Introduction to three powerful chart patterns for swing trading.
• Sharing scanner settings and criteria to find these setups.

Key Chart Patterns for Swing Trading

1. Wedge Breakout

• Characteristics:
  • Involves a retesting of the downtrend multiple times before a breakout.
  • Different names: Triangle breakout, Rising wedge, Downtrend break.
  • Example: AU (Gold stock) - Breakout above resistance after wedge formation.
  • ERJ (Energy stock) - Similar wedge pattern and breakout.
• Entry/Exit Strategy:
  • Avoid buying during extended candles.
  • Look for consolidation and a breakout candle riding above 8 EMA.
  • Prefer candle breaks above downtrend after retesting.

2. Long-term Downtrend Break

• Characteristics:
  • Focus on large-cap stocks, not suitable for small-cap.
  • Stocks trading below 200 SMA starting to trend above 8 EMA.
  • Example: INTC (Intel) - Breakout with a new CEO as a catalyst.
  • CRS (Corsair) - Reclaimed 8 EMA leading to a rally.
• Entry/Exit Strategy:
  • Enter upon cross of 200 SMA and 8 EMA, which signifies a downtrend break.
  • Place stop below 200 SMA.
  • Preferred over wedge breakout due to slower, steadier breakout.

3. Oversold Chart Pattern

• Characteristics:
  • Look for stocks with drastic sell-offs below 200 SMA.
  • Ensure the catalyst for the sell-off is recoverable.
  • Example: KBA - Reclaiming 8 EMA after a major sell-off.
  • ACN - Potential setup when reclaiming EMA.
• Entry/Exit Strategy:
  • Enter when the stock reclaims 8 EMA.
  • Risk management involves stops below 8 EMA or previous lows.

Additional Tips and Tools

• Inverse ETFs as a tool for bearish market conditions.
• Example: SPXD, a -2x inverse ETF for the S&P 500.
• Importance of consulting with professionals and assessing risks before using leveraged ETFs.

How to Find These Chart Patterns

• Use Finviz.com for free screening.
• Key criteria: Market cap over $2 billion, price over $1, volume over 750K, relative volume over 2.
• Use technical analysis tools to identify patterns like wedge and downtrend breaks.

Conclusion

• Trading nuances and pattern recognition are crucial in different market conditions.
• Utilize free resources like Finviz to scan for potential swing trading setups.
• Encourage questions and further exploration of swing trading strategies.