Consistency should be your ultimate goal as a trader and/or investor. Using a set of criteria to select stocks for swing or position trades, each time we select a candidate, leads to a consistent result. If a trader is thinking long, we should see the following criteria and rules. If we do, our candidates have a higher probability of doing what we expect. In contrast, selecting a stock because you “think” it is going to move in your anticipated direction, is why so many new traders fail in this business.Opinions WILL NOT produce consistent results. Therefore, we need to see the following:
Bullish Strategy: 10e/STO/MACD Setup
- Price is above or about to emerge above the 9/20ema.
- MACD is above its signal line or recently crossed higher.
- Momentum (MACD histogram) is shifting in the bullish direction – showing bears have lost control
- Stochastic is or has recently cycled from below 20 and shows signs of turning up.
- RSI is rising. Recently oversold (< 30) conditions are a plus
- Above average volume is present (institutions are involved)
- The stock should be in an industry group or sector that is showing favor (bullish)
Bearish Strategy:
Reverse the above conditions. Look for rejection at the overhead 9/20ema. RSI should be dropping, with stochastic and MACD.
Sterling Bancorp is trading post earnings. It meets all of our bullish criteria. Volume shows institutions are involved. We like an entry at 25.10 or better (possible PBBO = 24.50 zone) with a stop just below major VBP support 24.00 (+/-). Watch for early signs that XLF is in play. Also monitor the leading stocks in the group. BAC, GS, JPM, MS, WFC, for bullish characteristics. There is no hurry, so use your 5/15min chart for entry timing, where a flag into 9ema usually works best. Swing Trade.
PRI was on the watch list many months ago. The trend is intact, recently being tested on Friday. Note the wick at the 9ema. There are buyers at that level, so a stop just below the flag, 79.40 (+/-) makes sense. RSI is embedded, so this is a scalp trade; use your 5/15min for entry.
CDW will most likely follow through at some point. RSI is embedded. Note this is a scalp; watch list comments. Use your 5/15min for entries, with a flag into the rising 9/20ema ideally, for entry after a bullish candle signals “continuation”. Hint: reference, “Traders Tip #10”
SCHW should follow through and produce a bullish candle initially, to confirm a long entry. We want to see active buyers. Monitor short time frames in addition to the daily. Stop at 41.00 (+/-). The stock is trading post earnings and should continue “if” XLF remains bullish this week. If we see follow through, I would consider covered calls on this position once it gets moving. Review the weekend BLOG POST for more on income trading.
I like the bullish candle AMD produced on Friday. We’ll watch for follow through in the semiconductor group.
The watch list is embedded for quick reference. We might ass to LOW on a flag breakout, just monitor Home Depot at the same time. Amazon and Google are self explanatory; scalps and day trades only.
Relax and enjoy. I will talk you through the markets from this point forward from 9:15AM to 4PM, with a lunch break around 12:00PM EST (+/-), so long as the markets aren’t going space shuttle. 🙂
Happy Turnaround Tuesday
Vinny
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