Swing Trading Days to Weeks | John McNichol | 2-9-21 | Bull Flag Setups
good morning everyone john mcnichol here and welcome to another fantastic day of education with td ameritrade you have reached swing trading days to weeks our topic is looking at short-term trade setups that may last over several days to a few week duration and this day is no different so stick around all right hey do appreciate those of you that are live with us today uh such as monica frank neil david jerusalema wayne charles medhi hussein ricardo jj and everyone else do appreciate you joining us each and every week live uh michelle as well and uh guess what we got cameron may helping out on the chat uh anything that i am unable to address in the chat cameron will be happy to help out do appreciate you being here also appreciate those who listen in the archive session as well uh if you like this video make sure you click like as well as subscribe that way other users can have access to this content and also you can follow me on twitter at jmcnickel underscore tda now you'll see that address on the bottom of the screen as well as on the title let's go and take care of disclosures and see what's happening on the market today options not suitable for all investors as well spread straddles other multi-lake option strategies often involve greater more complex risks in single-leg option trades along with additional uh transaction fees now in order to demonstrate the functionality of the platform we will be looking at actual symbols keeping in mind td ameritrade does not make recommendations or determine suitability of any security or strategy for individual traders any investment decision you make in your self-directed account is solely your responsibility now you're encouraged to practice what you learn today with tools such as paper money which is for educational purposes and successful virtual trading during one time period does not guarantee successful investment of actual funds during later time periods market conditions change continuously as always all investing involves risks including the risk of loss now while a stop-loss order a stop-loss order will not guarantee an execution at or near the activation price once activated they compete with other income and market orders all right and coming up our agenda we'll take a look at the market open uh we'll uh look at previous weeks practice trades and we'll look at new swing setups so without further ado let's bring up the thinkorswim platform hope everyone's enjoying their week uh those of you that did not work yesterday hopefully you recovered from uh your super uh super monday uh illness i heard 25 supposedly of people who watched the super bowl uh did not show up for work the next day uh i know i was here cameron was here uh hopefully you were here as well all right and uh again make a note uh over on the scratch pad you can see the twitter handle there i know cameron shared his uh at cma underscore tda and you can also see links as far as the trader talks and investors insights that are part of the td ameritrade educational family all right so we're looking at the s p 500 after pretty much advancing for almost six days straight opening inside the range of the previous day a common situation to occur when we do see a very strong swing over multiple days and completion of a another successful swing a successful swing is defined as a higher low that is followed by a higher high that takes out a previous high now we showed you some productivity tools for those you that are very new uh to swing trading or technical analysis in general if you are new this session please uh go and type in the chat let us know that you're new i always like to welcome new followers and new clients but to help you identify those highs and lows we do have that patterns tool within the thinkorswim platform we can select show patterns select patterns and this is part of the candlestick tab go to candlestick and it is the williams fractal i talk about this a lot also in some of our workshops on technical analysis uh one of my favorite indicators as a teach-in tool uh to help identify highs and lows in the trend we'll leave those default settings in there click ok you can see the fractal point from previous low there's the high and price swinging taking out that previous high a successful swing i did comment uh in the previous week uh as momentum was slowing down question mark would this turn into a swing failure a swing failure would be when prices fail to take out a previous high in this case and a confirmation is kind of more of a candle reversal does price close below the low of the high day in this case it did not occur price actually held open in the higher range and that momentum continued you know now we're seeing a inside day some traders call that a harami if that holds inside that previous day and if prices were to start to pull back go below the low of a high day or below the low of a a smaller pattern if this was to close out today that would be the potential end of the swing you can kind of see an example of that back here on the spx price made a high and pulled back even though it was only one day nevertheless a pullback so when we look at the market today there may be potential where we may see some prices pulling back slightly that can be a setup for the next swing so that's what the s p is doing we're probably going to see a similar situations across the board as all major market indices did make a successful swing taking out previous highs and good as i'm looking at the comments so we got jeff and ashley chertree tech family to donna and a few of you that are first-timers welcome make sure you follow cameron if you're very new to technical analysis and when i'm going over maybe a little over the head he teaches a getting started with technical analysis every monday uh at uh 11 a.m eastern time following my futures class uh so as we see the nasdaq uh nasdaq's looking a little better uh as it's inside that range but coming uh off higher from the open there as you can see more of a positive candle there the dow components you know barely took out those highs the dow's lagged uh the some of the broader markets particularly the s p talked about this yesterday in breakout and reversal patterns on technically speaking you know relative strength of the dow compared to the s p has been relatively weaker nevertheless they did squeeze out a successful swing high taking out that high and again we're seeing a little more of an inside day harami uh of this previous swing and last but certainly not least the russell tweeted about this yesterday uh russell clearly made a new swing high uh we're inside but barely inside as the momentum in the small caps uh continues may see a little bit of a slowdown here and if you do follow me on twitter some of the productivity tools that you'll see in this class particularly on script uh are on a pinned tweet you're welcome to take a look at that it also gives instructions on how to add them and the tweet from yesterday uh concerning the small caps you know small caps are up 50 since november uh and uh you know even though the larger caps have been making new highs the relative strength of the small cap compared to the s p and compared to the even the nasdaq have been pretty phenomenal uh going back back in early november there when they started breaking out and really hasn't shown any signs of pulling back although there is downside risk as we can look and see where some of those averages are but a very impressive move on the nasdaq all right now let's go ahead and take a look at uh some of the sectors uh driving it and as we look at the sectors they can help us you know point towards you know some of those areas of the market that are showing some strength and you know as the market is a little more consolidating in the range of yesterday uh sector performance is a bit mixed uh with a little more on the defensive side and we talk about risk on risk on sector risk on risk-off sectors uh defensive areas uh real estate's a little bit on their own there but we got utilities staples health care kind of the trifecta of defensive more industries are leading today where a lot of the more uh on the risk on sectors energies materials information tech are backing off a bit after some stronger gains now from a standpoint of relative strength uh you know over the last month you know real estate communication services and infotech have been some of the best performing industries over the last month uh including energy and their relative strength is still there so you know any pullbacks in some of these areas you know may point towards a stronger potential swing so for instance you know as we go ahead and look at some of these sectors you can see stronger swings higher highs stronger trend you know all these are relatively similar and these are areas that are outperforming the s p currently now if we go ahead and drop down we are still in an earning season as many major stocks in the pre-market uh announcing dow or dupont i should say announced they're rolling over a bit today so has an impact on probably some of the chemicals and industrials let's see cgc and look at this one here we're in the healthcare arena it looks like they're up on the day and just notice another one mlm i think this is martin this is martin marietta kind of more on the uh the industrial side uh they're up today as well and some of the big ones in the post market uh we got uh akam this will be in the afternoon after market closed today uh cisco and twitter or other two big ones as well so if we can bring that up and we highlight cisco on a breakout uh before i can't remember this class or on um the uh in the breakdown reversals class as a cisco breaking out having a positive swing potentially setting up for a a flag uh where price is pulling back over a couple of days some traders may look for that bounce and we'll see if we can identify some of those setups today again with an earnings event that can potentially set up more with a gap and then twitter as well has been making a monster move uh since being below uh their averages not much more than a couple weeks ago so still a lot of momentum out there uh as we go into that earnings event remember last week i showed you as well you can go to that market watch tab uh can sort through some of the indices this case the s p seeing uh which stocks you may find some i notice a time for a under represented stock in the underwear front there i guess hbi hanes brands not sure what happened with them looks like they must have hit pretty big on earnings and uh looking down the list uh simon property group uh probably given a boost to the real estate area uh you know a lot of concerns uh as far as with the reopening you know how stocks like simon property may fare looks like haven't looked at the details but looks like they're faring pretty well as they're taking out those highs we're looking to take out those highs and stocks like activision uh up on the day atvi let's see that so still strong trends still some good momentum there now other stocks a lot of the big fans have already uh came out with uh their earnings you know such as apple but notice apple's kind of lagging a bit uh still off of their highs we're seeing indexes taking out new highs apple lagging a bit which means there's been rotation in other areas of the market uh you know as far as a setup a typical swing trade that we've generally been looking at is looking for prices where the overall trend is making higher highs and higher lows as we kind of look at apple you know here was a previous high kind of went into a correction still kind of held that overall trend made a new high pulled back came close to testing those lows ideally when it comes to momentum we'd like to see those higher lows being above some of those previous highs so notice a bit more price action back and forth with something such as apple and a a question mark here is you know will this transition from higher highs to lower highs this is a pattern we talk about in our breakout and reversals you know is this potentially setting up to be a head and shoulders it should be more of a topping pattern uh from a bullish perspective you know one could be looking for a breakout uh you know in this case you know looking at some of those previous highs now notice on the williams fractal uh it kind of plots some of the more major highs it's not necessarily capturing the minor ones but one still has to do their due diligence and looking at you know for a break in that resistance area keeping in mind that you know little under below the curve as this was certainly a more of a stronger pullback all right and uh stocks like facebook you know are showing similar things notice in the case of facebook facebook actually broke down in its trend and if i go back a little bit more you can kind of see more of this topping action question mark if apple's going to do the same thing so from a swing trader perspective on momentum you know not as good of a candidate on other stocks that are clearly strength trending up okay you probably go ahead and look at some of the other uh you know fangs as well and see how they're doing you know netflix you know they briefly broke out of a sideways range but notice you know we're still in a range that we've held since july so even stocks such as netflix has generally lagged the market looks like it's just kind of outperforming the s p over a period of time but it's not as strong as other stocks so you know this is something kind of consider as a weekly routine from a swing trader perspective is you know where are the stronger trends you know where is that momentum because the shorter term traders are typically trying to capture those short bursts of momentum now i looked at jack mentioned about uh you know interest rates and other things that's also something to consider on a you know a week-to-week basis i've highlighted as well as other instructors have highlighted different interest rates such as a 10-year and uh those rates have been trending higher uh that can have an impact on on equities particularly if they move up fast and uh now they are backing off a little bit today and that's probably why that's benefiting areas such as real estate staples and and utilities that are a little more sensitive to those rates being lower whereas banks financials are going to benefit from those being a bit higher okay all right now i'm not going to get into any of the cannabis stocks or or anything like that as well as on the bitcoin uh side we're gonna stick to more on the uh more widely traded a little less uh i would say less speculative but potentially less volatile let's go ahead and drill down and look at some of our practice trades from last week we did uh two examples of a spread trade both bullish these were examples of what we call long call spreads we teach these on friday a correction on thursday on the long verticals and diagonals class teach every thursday at 3 pm eastern time we did one on bank of america and we did one on disney uh for those of you that missed it you can go back and look at the archive for that uh the idea is pretty simple uh we bought a call which you know those that are bullish and trading individual options you know a call uh would be one way of doing that to try and profit from the stocks move by putting up less equity uh the um sorry michelle the the opposite side is we also go ahead and sell an option which basically reduce the cost of the original option by selling that that's actually a credit and by reducing that we do offset it that our gain is going to be essentially capped uh basically to that long or to correction to that short strike there's a defined risk and defined gain going at expiration but it's a relatively cheaper and easier entry uh for smaller accounts to try and you know capture some of the moves and some of these stocks now i did go out uh you know about 30 days on this so we're only about a week in on this but let's take a look at it from a standpoint of profit management uh in the case of the bank america you know we had bought a buck 16 and sold 55 so i believe that came out to be about what um that should be about uh about 59 cents i believe if we were to right click uh on the position create a closing order uh you know that option is worth about 94 cents now one way of targeting uh profits it was actually a little more yesterday but the way to coming in is you know if you're able to capture about fifty percent of that move or fifty percent of those profits uh then one may consider possibly closing that out uh we're just a little under there so we'll hold off on that uh if we go look at disney and uh look at the trade on this one we had uh bought 940 and sold seven so that was a dollar forty spread i go ahead and look to create this uh notice this option is now worth 347. so we basically have gained over a hundred percent uh on this spread right here and if we go ahead and we take a look at that on disney you know one can use that as an opportunity to whether scale out or close out the position now if you recall when we looked at this there was an earnings event and you know keep in mind on a swing trade when there's an earnings event on considering you know closing or scaling out of that trade so that's exactly what we're going to do particularly since we have an inside day after a big move on that uh we can go ahead and close out that position so i go ahead and right click create a closing order and notice uh you know another way of viewing is uh as far as with the gains is you know how much of the gains are you willing to risk you know to make additional now notice this is a five dollar spread so the most that this spray can possibly be worth is five dollars per share we're at 355. that means there's about a buck 45 left of profit now we already gained uh about a buck 50 bucks 60 on there so you're willing to risk that to make that additional gain some traders may say yeah you can you can close out just one of the spreads and leave the other one on that way you're reducing the risk and see what other gains that you have but since we do have an earnings event may not want to risk doing that we'll just go ahead and close this out now this is something to possibly consider you know whether you're looking at earlier in the day or look to see how it settles later in the day since we're in class you know want to make sure have an opportunity to show you how we can manage these trades right now there's a little bit of a spread between where the market price is and where the mid price is a lot of that happens uh particularly closer around the opening i'll see if we can go ahead and get it filled close for that price otherwise someone may go ahead and adjust you know down a little bit closer to that natural price i'll see if we can go ahead and get filled around here looks like we did so we were able to go ahead and fill that at 355.
so a little trade management there for you all right let's go ahead and take a look at some additional setups here and to do that we'll use some of our productivity tools here so i have a list of penny increment stocks which is one of the public lists uh we also have uh our moving average crossovers which indicate uh as far as trend and for some of the swing setups uh you know identifying some of the stocks that are in stronger trends so for instance here's exxon mobil if i go and click on exxon mobil notice that it's in bright green which implies that all the averages are above each other example the 55-day moving average representing our trend for swing traders trading with the trend is paramount uh notice when you see a stronger trend you can see up swings that follow that trend notice typically the down swings may be a little more dragged out typically more or less momentum to the downside the momentum's to the upside whereas uh stocks that are trending down like united healthcare which is showing in the red implying that's below the average is you can see that when a trend breaks to the downside that momentum may end up being more towards the downside and therefore look to trade the bearish swings so going back to exon mobile uh one thing to consider on some of these setups and what i'm doing is i'm i'm moving to the previous stock so we can focus on looking on the script here notice on exxon mobil it's showing again stronger trend but the next indicator which is the hold that's if price is closing above the low of a high day which could be a bullish bounce or if price is closing below the low of the high day or kind of a kablowed uh that would be more of a bearish signal so kind of green for potentially the beginning of an upward swing red for the potential the end of the swing and so if we go ahead and look at exxon mobil notice it's red for that that's because when we look at it notice that price has traded below the low of the high day thus ending this swing and with about a day lag one would probably see a williams fractal appear on there so you can do some back testing and measure some of those previous swings now this right here would be an example of looking for another setup for the swing so in utilizing some of these indicators here if one's looking for a setup that may occur uh over the next couple of days looking for stocks that have a strong trend that may just be starting to pull back now again i utilize some of these uh script here to do that and again those of you if you're following you can add those they're right here on the scratch pad and for more details once again if you go to twitter and look at my profile on the pin tweet the document here will give you a background on what those indicators are doing you know in this case uh the green which we're looking at is all those averages are above each other and then the other indicator that hold is whether looking for prices trading above the highs of low days which will show green to include those inside days that i highlight those harami's whereas red is going to look for prices below the low of a high day looking for more of that bearish candle reversal to include some of those inside days so you can go ahead and follow these instructions go ahead and add those if you wish i know some of you are already following along with that all right so now if we go ahead and take a look uh so there's x on mobile let's see if anyone else is uh relatively stronger here's a f uh i believe this is amber crombie go to analyze tab and look at the fundamentals you can learn more about what company you're looking at on a consumer discretionary discretionary stocks have generally been doing better as well compared to the market and so we can see a stock that's in a pullback over these last two days so here's a swing what i can do is i can take a drawing tool we'll take the drawing tool and we're going to measure from the low to the high that would be an example of a swing and then we don't know if this is going to be the low day but one can potentially look if this price holds like this a trigger for another swing would be looking for price to trade above the high the low day now we're earlier in the day we don't know how this candle is going to end up price can continue pulling back as long as it's pulling back and making a higher low that is good although preferably traders would like to see previous highs hold so looking at some of these previous highs i know that price pushed up higher there but here you can kind of see that range that resistance broken resistance this is one of uh mine and cameron's favorite maxim here is broken resistance has a tendency of acting as new support so by seeing that low hold there we may potentially look for that bounce and if that was to occur let's say tomorrow then this script on this side uh should turn green now i'm not saying that one follows indicators blindly notice i use the indicators to look for the actual setup okay to look for the actual setup not looking for uh once the cat's out of the bag although one can do that and may have an opportunity but look for the setup a great analogy you know shared by my good friend scott thompson who's one of our team leads uh is is just kind of the analogy of the red light green light you know if one is on your way okay you're going somewhere you're traveling you have you're demonstrating that momentum just like a stock okay at times you're going to come to a red light so you have to pause that's what these pullbacks are in a trend they're kind of a pause prices may drift back a little bit and at some point the light will turn green again and then prices may bounce and continue on their way continue on that momentum so that's how we're able to find a f on at that example because we have a stock that is trending up uh and is just starting to pull back and so with that uh what we can do is uh let me adjust this chart a little bit drawings here kind of zoomed in that's why i'm kind of panning it a little bit or we can see that and then as far as targeted potential move one can look at that previous swing this is what we call a a flagpole part of a flag this example a bull flag since it's a bullish direction i can go ahead and right click on that line not the line the line not the bar right click on the line i can activate that line or create a duplicate and then basically go to where that projected low is and then that would give us a possible target assuming that it makes a similar move we can utilize drawing tools to identify those targets as well and if you go back on the chart you know you may see some confluence with some previous highs although in the case of uh abercrombie we have to go back a bit as you can see kind of the long road on recovery nice double bottom bullish reversal trend and looks like that 29 would be pushing up into some of those previous highs so kind of a likely target notice here market has a memory looking at those highs there you go so possibly a little stimulus on the way uh can uh possibly help stocks like abercrombie uh have that successful type of move uh earnings are gonna be a bit higher now what i'll do on this one this one will be a little more anticipating uh since uh prices have already pulled back to that level uh if i wanted to go ahead and do an individual stock i can go ahead and let's say i'll uh i'll right click on the chart i'm going to do this a little bit differently let's see what i'm going to say is that if the price is above or holds this support at the end of the day uh we'll look for an entry there so i'm going to do is i'm going to go ahead and right click on the chart i'm going to go ahead and do a a by custom with oco bracket and you know consider uh allocation how much one is willing to allocate into a stock if i did 200 shares this would cost about five thousand dollars and uh eric mentioned about options one can do options as well although i do need to mix it up a bit uh you know some people uh may not like to do options and may be perfectly happy on trading a stock so i'm going to do that as an example if you want to do an option or maybe even look at a spread that i talked about last week you know one can do any type of bullish trade there's several options to do so with that we have an entry i'm going to change the time and force for the exits to gtc that's good till cancel we want these orders to be working for us this type of order first triggers oco would enable one to place a trade and then have basically the planned exit which could be a target as well as a potential stop now we already have an idea of what the target would be uh which i believe was at around 29 and change let's i'll just make it a little under that let's say it will make it that 28.86 so on the limit i can make that 28.86 hit enter now as far as a stop a stop would typically be set you know below in case of a flag it would be a percentage below that low or if you have a support it could be a percentage below that support so we can kind of use that low as bit of a guideline which for today is 24 70 i can go ahead and say we'll set a stop let's say one percent below that level so i'll go to our calculator do 2470 times 0.99
that would be a stop of 2443. so i can go ahead and adjust that to 24 43 now keep in mind a stop is not guaranteed to fill at that price once it hits that price it's going to compete against other market orders that stock could be a lower price it could be significantly lower particularly if there's a gap all right so i basically have the exits planned out on this and you know one can go ahead and also do the same thing on the chart you know as i kind of illustrated you know i can go ahead and you know edit the properties on a drawn line so you can kind of visualize you know where your target is see if i can do go ahead and do that again like i said it was like 28.86 now i can go ahead and also duplicate that line don't allow me to do that oh let's try that again do a duplicate drawing and i can go ahead and pull that down to you know where my potential stop would be do that for illustrate purposes now the last thing as far as placing this order now uh if i was doing this at the end of the day i can place an order to enter as the price trades above the high of that low day um now i don't have that luxury right now because we're not at the close let's have a little aggressive and wanted to enter as long as this support holds well i can put in a condition that if the price is above that level at the end of the day we can go ahead and buy that stock so to do that i can go here now i can make this a market order however keep in mind uh with that we don't have control over the price one can pay potentially more than they expect but since i'm placing this during market uh not expecting a gap or anything along that line and then i can go ahead and add a condition and you know we've been doing it lots of different conditions based off of price based off of indicators in this class so if i go ahead and actually move over you'll see that gear appear that's where we can add that condition so i'm going to go ahead and click on that that'll bring up a condition and it's around here under conditions we can go ahead and modify this so so for instance i can go ahead and put a check box here to submit this order today and then go ahead and set a time uh let's say i set the time in the last half hour or maybe the last 45 minute last uh 15 minutes you know one can go ahead and set a time closer to the close to submit this in this case up gotta do military time i believe let's do 13. so it's a good opportunity to buck up on your 24 hour clock so right there we have it set for 13.45 i'm in mountain time so that's about 15 minutes before the market close now here on condition i can go ahead say and notice my click on the box it says anf and i can say if the mark which is the equivalent of the last price notice there's other things you can do too you can do it based off of a study which we've done and will continue to do in the future and i can go ahead and say hey if that's mark or the last price is greater than or equal to and i'll just go ahead and say 24 80 which is about where that current support is all right go and click save and i'm going to go ahead and hit confirm and send then we can read the trade that's confirm and send not send send we're going to say is buy 200 shares of anf at the market submitted today about 15 minutes before the market close if the stock is at or above 24.80 if that's triggered and is filled then we're going to have a bracket order which will be submitted at the same time once that's filled then it will attempt to sell if we hit 28.86
or if the stop rolls over and trades below 24.43 all right well again we'll send that through and that order will be working for us and then you know one can certainly have reevaluated look at the latter part of the day you know if they see the stock is pulling back even more you can always go ahead and cancel the order or you can cancel and replace and create a setup for the following day if you want to wait for a little more of a confirmation of that bounce all right so hopefully you found that helpful there folks and what i encourage you to do is you know look at other stocks that may be in your watch list uh you know again you can look at some of the public lists such as the penny increment list or you know look at index lists uh the nasdaq 100 uh you know stocks that are a little more higher beta uh you know and and may be conducive to some bigger swings and one can go ahead and look for stocks that are showing those characteristics may take a few moments for this to load up here particularly in the morning but based off of what the market's been doing where we've seen some strong swings up and possibly seeing a little bit of a pullback maybe looking for a similar setup that i just showed you uh on a f stocks that are relatively stronger tesla there tesla pulling back looks like tesla's gonna have to be a little more of a breakout as an example and see if we can find a lot of the tech stocks are still kind of going more sideways here's munster mnst no stronger trend potentially pulling back today so here we go we can see another example of a full flag previous downward move reverse and making higher highs and higher lows you can see an example of a swing and those those william fractals on previous swings can be a guide to help you identify those swings here's a pullback one two three typical on flags looking for a three to five day pullback i'll duplicate this and then there is another potential setup so maybe another one to practice with all right all right folks well our time has ended uh hopefully you learned something new today as we kind of looked at the market from the top down where the momentum is in different areas of the market and identify examples of swing trades along with doing some of the trade management once again we'd encourage you to practice what you learn here today on the paper money platform and remember in order to demonstrate the functionality of the platform we had to use actual symbols keeping in mind td ameritrade does not make recommendations or determine suitability of any security or strategy for individual traders any investment decision you make in your self-directed account is solely your responsibility so once again folks if you liked what you listened to today make sure you click like on the video and subscribe to trader talks and follow me on twitter and as was already mentioned multiple times all of those shared script are in the left-hand margin of my scratch pad throughout the session and if you come to twitter and go to the pin tweet gives you even more detail on these steps to go ahead and follow to add those crossovers and those kaholts so let's let you go folks have a wonderful day looking forward to talking with you again real soon bye now you
2021-02-13 08:51
