Planning Your First Swing Trade

 good morning and welcome everyone myname is cameron may it's 11 o'clock eastern standard time ona monday morning and that means it's time for getting started with technicalanalysis and as you can already see by thetitle on today's webcast we're going to be discussingshort-term trading also known as swing trading i realize that it can beintimidating when when a new investor is trying to planthe very first trade so we're going to betaking things from a pretty basic level just planninguh four steps for getting that very first swing trade entered solooking forward to it but let me say hello to everybody that's joining mei can see that connie hill is standing by to help us with chat questions sothank you connie for being there if you have any questions you can pose thosei'll try to address those as as i can through the natural flow of thepresentation but if i can't get to it kyle you'll help us outbut we already have nearly 100 people with us so let me just say hello to uhto our returning veterans and anybody actually who might be herefor the very first time but uh andres vanessakenny lewis anthony who else is here jenny radio wayne doris sergiodale mrs b capen vanessa grace alfred sergio and on and on thelist goes so thanks for being here week after week i always appreciate yourcontributions your participation if you are here forthe very first time if you'd like to chime in let me know where you'rechecking in from i always like to see who's here and who's new but enjoy thepresentation and

 if you're watching on the youtubearchive after the fact enjoy the show butbe aware that you're invited to join us live on monday mornings if you want tojoin us 11 o'clock eastern standard times whenwe kick things off and we don't really go much beyond about 30 minutes sodon't be late all right so let's get right into itvery first thing that we always do is pause to consider the risks associatedwith our investing so some important information to bear in mindany investment decision you make in your self-directed account is solely yourresponsibility paper money success is not a guaranteethey're going to have success with your real fundsall investing involves risks including risk of lossand while this webcast discusses technical analysisother approaches including fundamental analysis may assert very different viewsalright so we have three items on our agenda for the day as we doeach week today we're talking about swing trading so we're going to discussfour potential steps for swing trading thenwe're going to get into using the charts to address those steps we're going touse price patterns to plan those four stepsand then finally we're going to tie it all together we've covered that in thefirst two bullet points the theory and we're going to go to applicationusing example charts and try to place an example trade beforewe're done so everybody goes home with a better understanding of how to plana short term or what's known as a swing trade all right let mei also just want to go back to the chats here because i do see i get gettingweather reports from around the country and just location reports hello thereuh you know first time from houston welcome nino first timeuh from new york hello renita good to see youyeah so connie and i are here in utah i'm in saratoga springs utah connie'stelling us that and she's correct it's going to be awarm one today we're pushing up toward triple digits this week sohope everybody's enjoying some great weather out there but

 let's get to themarkets all right so here's uh step number onethat we wanted to cover today four potential steps for planning aswing trade all right so if you'll notice here inour chat or pardon me on our scratch pad i've outlined i outlined four potentialsteps for planning this short term trade very first and i think this isi can just relate to this personally thinking back to uhwhen i encountered this concept of swing tradingor short-term trading which is getting getting into a trade and getting out ofa trade within a few days to maybe a few weeks a lot of pressure comes withthat however maybe some of that pressure isalleviated if we can at least be on the correctside of the market maybe you veterans can back me up on this but has anybodyentered at a time you think maybe that entry wasn't wasn't terrifichowever the market erased some of my mistakesthat's a possibility at other times though we can have what wewhat we think is the perfect entry and then the market has different ideasif we're trying to place bullish swing trades or bullish short-term trades in abearish market environment that can be a bit of an uphill battleand vice versa if we're doing bearish short-term trades but themarkets are persistently bullish that can be difficult so let's go to ourcharts and see what's going on with the markets i don't think i'm going to spenda lot of time on this because pretty much we all know what's beenhappening we bottomed out back here on march 23rdand then we've been pressing higher in technical analysis termslooking at trend analysis we discussed trend analysis last week so i'm notgoing to go terribly deep into this but we've been seeing higher highs andhigher lows and if you carry that forward straight to the present day youcan see that we pushed up to a recent short-term high pulled down close to atrendline low and now it looks like we might begetting what we call a technical bounce a close above the high of the low dayfor those who have been following my webcast for any period of time thisshould be familiar terminology so just so you know this is agetting started with technical analysis webcast if you do feel likethis is good but you also would like to take your technical analysis to a higheror more advanced level we actually do have a more advancedcharting discussion called advanced charting techniquesthat's taught by john mcnichol on friday afternoons 

if you want to follow thatyou can follow live friday afternoons or i will link one of john's previouswebcasts in the archive for this session right up here in the upperright-hand corner all right but yeah here's the s p and we're justgoing to use that for our stand-in for the stock market right now this is justan index obviously there are there are companies thatthat lie outside of the s p 500 but the s p has been pushing up tohigher highs and higher lows and it looks like we may even be workingon a confirmed bounce in uh which could bein the eyes of some technical analysts a continuation of an established bullishtrend so for today's discussion about we'regoing to plan a bullish trade and we're going to betalking about bullish swing trading all right so next up when to buy andactually i'm going to summarize these next threeelements all in one chart behavior for sometechnical traders of the markets they'll look atprevious price behavior by a stock what is the stock done in the past and isthere anything that we might be able to learn from thatand apply toward expectations for the future so they literally studyprice patterns and then use those to extrapolate out priceexpectations now an expectation doesn't always pan out to be realitybut we're going to be going through three price patterns and these threeprice patterns are actually quite common at least in my observationon charts but they also tie very nicely toan article that quotes another one of our education coaches his name is benwatson i'm sure everybody is familiar with ben but ticker taperecently wrote an article um and 

i've linked that article in thedescription for this webcast okay so you can just go to thearchive and look at the description after thefact and read that article where ben talks about swing trading andusing price patterns to plan a swing trade sothat article was largely an inspiration for me to do thiswebcast so it's a great compliment it's a greatsupplement for this discussion that we're having todaysuzanne says i need a webcast for absolute beginners onon td ameritrade could you direct me uh that's a good question suzanneyes i can all right um i'm going to save myself just a littlebit of time but i'll give you a quick pointerwhen you log into your td ameritrade account go up to the educationtab and then click on the word webcast okay webcasts and you will and and onthat screen you'll be able to find a calendarfor current webcasts and one of those webcasts is taughtweekly and it's it's about getting started with td ameritradeyeah so you might want to check that out but if you're new looking for thegetting started title you'll see a number of those sprinkled throughoutthe week on a range of topics all right but let's get to our firstprice pattern and if i were to ask you veterans i wantyou to beat me to punch on this so get ready to type quickly if you wereto type in the most common price pattern thatyou've seen pop up on your charts what might that beand remember we're talking about bullish patterns herebut i'm going to start bringing up a symbol so you only get a few secondshere type that in we'll see if we agree buti'm going to bring up symbol ipgp so just that we're going to be using alls p 500 companies today but here's ipgp and you'll notice itstrend is pretty much in alignment with thetrend of the s p 500 generally moving higher you can see veryrecently though we've had an acceleration of that upwardtrend and 

then a pullback and for sometechnicians they look for exactly this sort of behavior when we see anupward trend with an acceleration in the direction of that trendthey actually will title this a flagpole and this pattern that we're going to bediscussing is called a bull flag and look what everybody'styping into your into the chats right now i didn't tell them to say thisthey typed this in there was a bit of a delay so they had their fingers workingbefore my chart came up yeah both flag is probablythe most common tony's talking about one this is a spoileralert but it's a good segue tony is mentioning abull pennant i'm gonna talk about those two today all rightthose also today okay but yeah we've had an accelerationof that previously established trend and sometimes we call that a flagpole that's just because it looks nice and straight sticking up in the air likea flagpole all right but really that's just areflection of rapid appreciation and prices now think about thisif prices go up sharply put yourselves in the shoes of theshareholders who own the stock maybe during this period where the stockreally wasn't doing much of anything just sort of chopping sideways andfinally some profits reveal themselves might you be able to see maybe sometraders are going to take some profits there's never a guaranteebut generally when there's a rapid move upward in thedirection of an established trend there's an expectation by technicaltraders that there should be some profit takingpulling the stock price back to some degree now to what degreeis the next question generally about a third to a half of thedistance traveled traveled upward so we might just eyeballthis flagpole length going up and expect the stock to pull back about a thirdto about a half and as it pulls back if we if we were to connect the highsand connect the lows within that pullback we call that the flag and ithink you can see why it's called a flag it kind of resemblesa flag that you have hanging outside during your favorite holiday or whateverso there's the flag pattern it's really just a a convenient label applied toa specific price behavior over time but the next valuable thing that that atechnician thinks they might take away fromthis behavior is what might happen next on the stockand here's the simple um assumption made of all price patterns if it'shappened in the past maybe it could happen again is itguaranteed it's going to happen again no but if we've seen an acceleration ofprice upward there was something that gotinvestors excited about that stock there's some profit takingbut maybe that excitement hasn't been completely erasedso once the profit taking is over maybe the stock will kick into gear againall right so that lays the groundwork for this entiretrade right so let's start to plan a tradebased on this price pattern so let's go to this first step when dowe buy based on this price pattern well if we're assuming that there's someprofit taking maybe that's reopening that window of opportunity for a newtrade however buying while the stock is stillgoing down 

maybe it's literally flying in the faceof the current momentum of the stock so a technician may wait for the stockprice to start to rise again in the specificentry here let me put an oval around thiswhen looking at a flag pattern is when the stockbreaks out above the flag downward sloping resistance line orprice ceiling that we've drawn here right so when we break out of thatpattern whether you've actually drawn the line on a chart or a trader is justeyeballing it when we pop up out of that patternthat's the entry signal right because the assumption here ismaybe the profit taking is over and the next upswing that next that nextstair step upward is beginning all right well that's greatwhere is this taking us well again assuming again it's not always a perfectassumption but assuming that what has happenedbefore it could at least possibly happen againwhere do we think the price might advance to from hereso this is addressing this next question when might a tradersell and take their profit well one technique the technique that'scommonly applied with a flag pattern is the measure the lengthof the flagpole and attach it to the top of theof the pattern okay now there are a couple of different ways that this nextstep might be done so i want to acknowledge that but i'mgoing to right click on this flagpole that i've donei'm going to duplicate that drawing and i'm just going to drag that new drawingup and there are two places where we might position itnow for those of you who use flags what i'd like to know is when you're doingyour paper money trading where do you position the bottom of thenext upswing there's a more conservativeplace to position 

it which is right down at thebottom of the flag can you see how the bottom of myupward sloping trend line intersects with the bottom of the flag patterna more aggressive positioning might be at the top of the flagpoleso you see that down here versus up here positioning it down loweractually results in a more conservative profit target positioning it up higherresults in a more aggressive profit target how about we just leave it rightthere i'm going to leave it at the lowerposition and now i'm going to come over here tothis right column see here here are prices off in this uh this right margini'm going to click and drag that downward that allows us to see the topof that line and finally i'm going to click to cement that lineright here this is giving us sort of a target price so if the stock were torepeat its behavior run up pull back and then run up thatsame distance again that would put us right around two hundred dollarsthat might be a technician's price target in thisexample okay that's interesting so doris saysthat uh they lost the audio if somebody couldjust chat in and say the audio still works for themthen that'll that'll let doris know that there's something they need to take withsome action they need to take from their endif nobody chats that there's any that the sound is uhworking for them then i'm going to question whether sound is working for mebut it looks fine for my end okay all right so it looks like we had abunch of votes for the lower portion of the flagand that is the more conservative placement we couldtheoretically set it at the breakout point right up here around that 178level all right but that gives us a potentialarea for taking profits okay so the great is so audio still good everywhereperfect thank you very much appreciated that'll help providesome clarification for doris and and it clarifies for meone final element in planning this swing tradewhen do we take our loss well pretty straightforward logic hereif the purpose for getting into this 

trade was an assumption that the profittaking is over and that we should be moving towarda new price target and instead the price starts to fall orin other words the profit taking resumes or the selling resumes whether it'sprofit taking or some bad news has reversed the currentthinking if we break that back down below the lowof the well let me just redraw that let's switch out our trend line but ifwe break below this pattern low a technicianmay pull a plug on this once again there could be a couple of differentapproaches here so for some technicians that wait if theif the pattern reverses if we break below its low by asignificant amount maybe it's one percent maybe it's three percent maybeit's one dollar maybe it's three dollars there's going to be some variation onthat theme from one trader to the next but the common theme there if we breakbelow the pattern it's time to get out there others though that don't have thatmuch patience so this is where i'd like you to chat in againand say where my you position this if you're doing a paper money trade on thiswould you get out breaking below this price pattern or if it's just breakingback below the breakout level that's the second variation that'ssometimes applied here obviously there could be others butthese are the two most common variations on managing thethe profit or the the losses on the tradefor our example today what i think we'll do is a two hundred dollar price targetand how about we look at the low let me clean things up here a little bitlet's actually let's remove that drawing um we already know where that tire let'sjust remove this breakout just cleaning things up a little bit andit looks like the low of this candle as i pointed a candle i can look right uphere and you see that l for low that lowsaround 173. how about we go one percent below 173which is going to be roughly a buck 70. it's actually buck 73below 173 that's going to have us around 17130. okay so if you can envision this let's sort of draw that line in hereour stop's going to be right down around thereso a little bit of patience with a reversal but not muchso how might we place this trade let's place this tradeand then i'm going to talk about two other price patterns we're going to gothrough those fairly quickly but if we have this plan in place we goplace our trade here's our ipgp we want to make surethat that symbol is correct how about we just buyyou know 10 shares small trade just for an example 

i'mgoing to go to the ask price to place our entry but i'm going to right clickon that ask price and put in a custom buy order with an oco bracket soright click on the ask price by custom with oco bracket that ocl bracket allowsus to put in it stands for one cancels the otherit allows us to put in two sellers but we only want one of those to to beexecuted the other one we want to we want to havecancelled but for right nowlet's dial down the number of shares that we're buyinglet's link all those orders together i just clicked on this little brokenchain link when that's a repaired chain link itlinks them all together for this example let's put in a marketorder and that just means that we're willingto pay whatever the current market price is for this stockand then we're going to put in two sell orders our first order ourlimit order is our target price so let's say that's 200 and our stop order is oursell order to get us out take our losses that's going to be around 171.30that's a that's about one percent below for as an examplebelow that uh pattern low and on both of those maybe we'll change that to goodtill canceled orders because we don't knowwhen one of those two levels should be hit eventuallybut we don't know when that's going to happen right now i suppose the stockcould just stop trading forever and go sidewaysforever i haven't seen that yet in my trading career butor you know maybe somebody comes and acquires it something goofy could happenbut really we should be hitting a target or a stop eventuallyjust remember that even having a stop order in place the 171 30. it's not aguarantee that we'll sell it exactly that pricebut i'm going to click confirm and send and this is how we mightenter that trade buying 10 shares of ipgpselling to take our profits or selling to take our lossesall right so that would be an example pretty complete planfor placing a swing trade now there i mentioned there are a couple ofother patterns 

that might allow a trader to plan something very similarso we've been looking at a bull flag and i wanted to look at that becauseit really is in my observation not only the most common it's pretty much by farthe most common next up though is at least again in myobservation the second most common and this issomething known as a triangle so let's look at symbol sbac all right with sbac what we're seeinghere is the stock is sort of entered into achannel prices or the highs if we're looking athighs and lows the highs are going lower but the lows are going higher and forsome some technicians they see this kind of like the coiling of a springa spring that's getting tighter and tighter and tighter when a stock startsto go sideways and the highs are getting lowerlows are getting higher it's like like the tension is mounting for thestock to do something and it should in the eyes of atechnician break out in a new in a new direction now whichdirection well the assumption with this pattern isthis is a continuation pattern so the typical assumption is that weshould break out toward the upside it's not a guaranteebut if we break out toward the upside thena technician might plan a trade around this behavior because once again we'relooking for history to repeat itselfnow is that always a guarantee no i've already said that a few times butbut what we're not asking the stock to do is do something that's never donethat it's never done before let's say you know just to exaggerate thingslet's say you have trader a who's looking at a stock and they're sayingboy i wish this stock would go up a hundred bucks in the next two days whichit has never done and they have trader b who says you knowwhat this stock recently went up five dollars over the course of10 days maybe it could do that again whoprobably has a more realistic outlook for that stock probably trader bthat's really the the genesis of this logic hereso when do we buy on a triangle i think you see why it's called atriangle because it's triangular well just like with that bull flag wemight buy on a breakout now earlier this morningwe had a little bit of a breakout that's why that candleswick is sticking up there but it's been retracing back down into the patternso we might have to wait a little bit more on this one i'm not going to beplacing any more trades today 

we're just going to be talkingabout examples for the rest of time just these uhdifferent price patterns but if we got that breakoutlet's open up this left column again if we have the buy signalwhen do we sell and take profit well with price patternswe measure the depth of the pattern with the flagthat was the flagpole with a triangle the depth isright back here at the start of the pattern so just go from thefrom the mouth of the pattern from high down to low so it looks likewe have a width going from 320 down to about 280 so that's about aforty dollar wide triangle so if we get a breakoutright here at around 302 maybe we look for a targetaround 342. once again a technician may this wouldnot be a terribly traditional approach to to uh triangles they might start thatdown here at the bottom that's not as commonwith triangles more commonly at the breakout levelso there there might be a plan for when to buy when to take profitsbut where we take our losses going back to our lesson on flagsif we break see a breakdown in the patternmaybe we get back out and for different investors that can mean different thingsone trader might consider breaking back intothe pattern itself not even breaking down below it but just breaking backinto it as a signal that the trade's not working out maybe it's time to take theprofits others might wait wait for a break backdown below the pattern okay and then set a specific thresholdone percent one dollar three percent three dollars whatever itmight be just breaking back down into or below that patternso there we have two different price patternsand the third that i wanted to discuss and all of these are really discussedin that article that i mentioned that i've linked in the descriptionokay ben watson has some thoughts on this as well so you might want to checkthat out but or let's see omra says would youshow us one more time how you're placing a tradeum with that what you might want to do you can go back to the archive for thisdiscussion just go about 20 minutes in and you'llfind how that trade was placed all right but let's plan one more tradeusing a different price pattern this th this price pattern is actually sortof a combination of the first two that we've discussedand this is going back someone mentioned this one alreadyso i said that we're going to discuss it we're going to it's called a pennantokay so a pennant for our example here let's look at rokpennant is very similar to a bull flag we have an acceleration of a previouslyestablished upward trend so here's a flagpole look at this stockjust racing up over the course of a couple of weeks from a low of about 208to a high of about 228 that's about a 10 percent run upin just a couple of weeks for a lot of investors they don't expect 10 percentexcept maybe over 

the course of a year so could that lead to some profit takingit could but in the case of a pennant rather than prices pulling down duringprofit taking they sort of go sideways the day-to-dayhighs get lower but the day-to-day day-to-day lows gethigher so we see price pinching out to a pointhere much like a miniature triangle at the top of a flagpole we call this apennant because it kind of resembles you know um when we uh i wasn'tthere at the time i apologize i'm 48 i'm getting along inin some years here but but going back to before my timewhen people would attend sporting events they'd wave their little flags on a on alittle wooden dowel or something and it wastriangular that's called a pennant okay so that'swhy we call this a pen it's a triangular flag at the top of a polebut its interpretation is exactly the sameas a flag pattern okay what we're looking for is arepeat of the flagpole following a consolidationthe reason the the assumed reason the stock prices didn't pull back during theprivate taking is maybe there's still enough enthusiasm uh onthe part of potential owners that for every sellerof the stock there's a new buyer picking things up soit sort of just sort of pushes prices out to a pointbut then once that profit taking eases or in other wordsonce there are more buyers than sellers we push up out of that patternand maybe we can start to set up a trade nowwhere do we set our target same logic as a flagwe measure the length of that flagpole and attach it either to the lowof the pattern or the breakout of the patternwhere do we plan to take our losses

 if we break that back down below thepattern and uh what's the buy signal justbreaking outside of the pattern that's it now what i do notice herethank you connie for helping out with thiswe do have the opportunity for if you do have the opportunity to give me somefeedback via a very short survey and i always appreciate those feedbackuh that that feedback helps me improve my webcast if you've neverfilled out one of our surveys before just click the linkyou can fill out after the webcast we have to click the link while the webcastis live but it's just five multiple choicequestions very quick click click click click click then you're doneall right but that helps us out so thank youbut we've actually accomplished everything that we set out to dowe wanted to discuss how to plan a swing trade or a short term tradeand we wanted to use price patterns in the construction of those trades andthen we wanted to do an example trade we did all those three things hopefullywe've gone from theory straight to application andspeaking of application right now might be a time if thisif any of these concepts are new to you maybe go to your paper money account seeif you can plan a swing trade around one of these threepatterns so see that gives you some flexibilityin what you can find see if you can find a flag patternit's probably going to be the easiest one to find or a triangleor a pendant see if you can plan a paper money trade around thatall right now what i i have a request of you beyond that though if you could helpme out i like i would like these sessions to bemore interactive so if you could give this some somethought what topic would you like to see discussed at agetting started level in this webcast and leave a comment onthis youtube video uh just right down below in the commentsfield i definitely would appreciate that i'll read that throughout the week andlook to see what ideas you might have and beyond thattime for me to set you loose 

we're going to take a little bit of a break and thenwe're going to hear from michael fairborne he's going to becoming up very shortly at discussing etfs so he's going to talk aboutbuilding and managing an etf portfolio so anthony you're welcome um eric is there a scripti don't have a script eric if you want to if you want to connect with coacheswho do scripting you might want to check out uh maybe ken rose or john mcnicholuh james boyd all right so yes if you and i see someof you making suggestions in the chat window right nowif you would save those suggestions maybe put them in the comments not inthe chats but in the comments after today's webcast that's what i'llbe looking for all right everybody thanks for joiningme today go check out remember in the descriptionis a link to that ticker tape article i want to check that outbut quick reminder of the risks associated with our investing risks arereal we did use real examples in today's discussion it's not a recommendation orendorsement of those securities or those strategiesand while this discussion does review technical analysisother approaches including fundamental analysis may assert very different viewseverybody i'll look for you next look forward to speaking with you next weekif you want to follow me on twitter my twitter handle is atc may underscore tda i try to post something therenew every day of the week sometimes it's personal sometimes it'smarket observations obviously but uh love to see familiar names popping up inmy twitter followers so i'll look for you there on twitteri'll look for you in the comments and again i'll look for youin my other webcasts that are scheduled throughout the week but hey whenever isee you again until that moment arrives i want to wishyou the very best of luck happy investing bye you