Swing Trading Days to Weeks | John McNichol | 1-19-21 | Swing Setup with Multiple Exits
good morning everyone john mcnichol here and welcome to another fantastic week of education with td ameritrade you've reached swing trading days to weeks we go ahead and look at setups that are over the shorter term days to weeks as described so stick around all right hey do appreciate everyone that's live with us today on this uh shorter trading week such as michelle ricardo phillip dom travis mike henry matt hussain yoko derek and everyone else hey we got cameron may helping out on the chat any questions i am unable to get to uh he'll be happy to help out also do appreciate those you listening to the archive session as well you can follow me on twitter at j mcnichol underscore tda if you wish to follow myself along with other fine instructors such as cameron may let's take care of disclosures and we'll get into our discussion folks options are not suitable for all investors as well as spread straddles other multi-leg option strategies often involve greater more complex risk now in order to demonstrate the functionality of the platform we will be looking at actual symbols keep in mind the 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 transaction costs should be considered when evaluating any trade and we have a demo account for practice trades looks like a real account but it is not you're encouraged to practice what you learn here today with tools such as the paper money application 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 a stop loss order will not guarantee an execution at or near an act the activation price once activated they will compete with other income and market orders as always all investing involves risks including the risk of loss and uh let's go ahead and we'll uh bring up our agenda we'll take a look at the market open now we did have a holiday hours uh yesterday with uh equity futures uh did trade uh for uh part of the day halted midday and opened up in the evening uh more positive we'll go ahead and take a look at swing setups do a practice trade and we'll also look at a previous trade example i'd like to thank barbara armstrong for covering the swing trading class last week as i had a bit of a schedule conflict uh particularly working with the technical analysis workshop i'd like to thank those you that attended last week and keep in mind we got some great education in store for you this week if you are on the education tab or on the td ameritrade website or on thinkorswim and go to the education tab uh keep an eye open for uh in-person events and uh schedule's been adjusted a bit so uh double check uh the dates and times but we have ben watson starting a option strategies workshop this evening and actually skipped it a little bit there starting this evening at uh 7 p.m eastern time and i believe this session will run from tuesday through friday and if you take a little peak going forward you'll see some other great uh workshops coming up with mike falette and advanced option strategies the following week all right let's go ahead and take a look at the market open we'll bring up the thinkorswim platform uh all the indices uh did uh open up positive i think on average about uh up about three quarters of a percent or just shy of that you know as we look at the s p 500 uh the sentiments still been uh bullish you know if we look at you know the principles of technical analysis that we learned last week as far as the trend and this is something that's very important for swing traders keep in mind swing traders are looking to try to ride the waves so to speak uh in a trend and uh if one's bullish would like to see that uh trend or that tide still coming in as we uh look at the s p 500 uh you know up about 25 points uh just shy about three quarters of a percent and we can look at some of the price action from the last week as uh you know prices had been more consolidating a little more of a a rectangle as we can see here one of the basic shapes uh in some of the different consolidation patterns between rectangles and triangles uh prices pulled back and we can see that pullback was back to some of the previous highs the previous consolidation that the s p had now overly that is a more bullish sentiment when prices pull back you know not only making higher lows in the trend and making higher highs but on those pullbacks uh seeing those pullbacks being at or above previous highs that broken resistance may have a tendency to act as new support currently seeing that uh also uh you know on the opening and things can change at the end of the day as uh we discussed uh in that technical analysis workshop uh a definition or one definition of a bounce is when prices trade or close above the high of the low day and here we have an example in the s p with that pullback from friday uh and you know with the a little more of a gap at the opening inside that previous range but price action is trading above the high the low day question is will it close above the high the low day we even see a little bit of a fade uh as uh prices have backed off now again we're just about seven minutes into the market for the week you can see those prices backing off bit of a fade a lot of you learned as far as with candle patterns those long shadows or wicks uh indicate failed moves uh whether to the you know the downside in this case from friday as a bull stepped in and pushed tried to push prices higher and at least got into that range from last week or in the case of today if things do kind of fade a bit uh after uh with some of the earnings announcements yeah and derek's right uh some of the characteristics so when we see a long tail uh at support kind of characteristics of a hammering pattern fairly common uh candle although the the textbook example would like to see that tail being at least twice as long as the body with the body being small relative to that tail but still similar characteristics and a symbol similar psychology there let's look at some of the other indices uh see if they're setting up the same way you know nasdaq a little more indecision at the opening uh yet positive you know with the drop on friday still kind of staying inside the range from friday if we look at some of the previous highs or the previous resistance you know we can see that nasdaq is uh you know a little more in that consolidation you know still making higher lows in the trend some traders may look at this as being more of an ascending triangle uh some that we discuss and technically speaking every monday at uh 2pm uh eastern time and also i'm sure i'm a good friend cameron uh we'll touch on some of these patterns as well in his getting started uh class which is at 11 a.m on mondays and now both of us uh along with everyone else i had a day off there uh an observance of martin luther king day so hopefully everyone uh had an opportunity to enjoy a long weekend and also reflect on the moment i was a bit busy myself going into the weekend sending off a bunch of soldiers to washington dc uh part of me wishes i can be with them uh but i'm just as happy to be here with you here this morning and uh they're in pretty good shape back there all right so that's what we got going on with the nasdaq uh some drivers will take a look at uh you know earnings are starting up again i know netflix is coming out this week that could be a bit of a driver along with some of the other fang stocks uh let's look at uh the dow we'll bring up a dj x dow positive as well again we can kind of see you know more of kind of that rectangle as far as you know multiple days of you know small bodies which represent kind of that indecision as far as a continuation you know looking for prices to break to the upside uh so far that has failed to do that had a dip below that support last week indicating weakness but again that long tail indicated at least initially a failed move as prices wanted to hold above that range now uh again looking at today's price action prices are trading above the high the low day a big driver with stocks such as goldman sachs uh knocking it out of the park a lot of the banks that have been involved in trading have been doing well whereas the banks that are not as involved in trading um have uh not as well so again a little fade there off of those highs and then finally the russell which has been an outperformer for some time uh actually seems to be uh once again outperforming being up about almost one and a quarter percent and notice a relative to what some of the other indices that we had been looking at with have been more range bound you know we can see the trend still being strong on the small caps and not letting up even having some shorter term uh moving averages like a five period the price is you know pretty much riding along that five period moving average indicating stronger momentum so a lot of your small caps may have similar fashion and you know not much of a pullback and staying above some of those previous highs this little pattern that we see even though it's kind of a one-day pullback you know patterns can form over any time period it can be relatively shorter term kind of a little more of a whether a pennant or you know a smaller rectangle and looking for prices to break out of that range would be a continuation of that trend uh look at some of the different sectors as far as who's leading this see uh being led by energy which has been a strong performer we've been talking about that may take a look at some uh energy stocks here for some examples up about 1.4 percent followed by discretionary
industrials information tech communication services uh possibly uh in anticipation of a stimulus bill and infrastructure we scroll down a bit as far as the laggards you can see that they're kind of the uh more along the lines of the classic defensive area of the market from consumer staples real estate utilities sometimes healthcare is part of that although biotech kind of falls so hybrid health is a little more of a hybrid there and another outside of being defensive these sectors are sensitive to interest rates and interest rates have been moving higher overall they did take a bit of a break last week as some of these sectors did push higher but traders maybe keep an eye on those interest rates to see if there's another pop to the upside or if the fed along with uh the treasury are able to try and keep some of those rates down all right now looking at uh you know some of the areas as far as with uh with setups you know we kind of did a top-down analysis at the moment here so we get a feel for starting off the week particularly with a holiday long weekend you know sometimes it uh you know requires to get uh get your bearings straight so to speak and so we haven't really seen anything fundamentally change with the markets uh compared to last week yes prices pulled back uh but traders particularly swing traders uh maybe looking for that bounce and so that's what we'll take a look to see if we can find some of those setups there we are in an earning season and so that is a concern so keep an eye on uh individual stocks if one is looking to trade those days to weeks is you know is there an earnings event that may come out uh during the time you intend to hold that stock and you can do that by not only looking at the charts where you have an icon that'll appear on the bottom of the chart we can also go to the earnings calendar whether on think or swim or i'll actually go ahead on td ameritrade bring that up going under research and ideas and go to calendar once there you can see different events both economic as well as earnings if we uh focus on earnings for a moment you can see uh what events are coming out on each day so you know as we go ahead and look at the 19th some companies have already came out such as bank of america uh goldman sachs uh all before market open you can see other examples that become an aftermarket so for instance netflix you can see coming from different areas of the market you know trucking uh transportation stocks uh have been uh outperforming uh jp hunt coming out after market today and you can kind of scroll down and look for you know some of the larger cap stocks that may be coming out or stocks that you may be interested in um going out and the rest of the week there's kind of a lot of the banks morgan stanley u.s bank corp we got unite health group so you can kind of see different stocks from across the board united airlines keep an eye on that you can continue that as you go through the rest of the week and then on the economic front a little bit lighter on the news uh it seems that some of the news may be a little more heavier on the housing market as far as with housing stocks between wednesday and going into thursday building permits housing starts obviously usual reports on unemployment and then rounding off the week with existing home sales and looking at uh natural gas and crude inventories all right so that's kind of your rundown on the week folks hopefully you found that helpful as we go back to the thinkorswim platform uh another uh tool that one can utilize to get a feel for what may be moving uh before the market starts or in the pre-market should say is uh going up to the market watch tab and a column that i have added is called a marked percent change now notice the markets are open right now i also have another column for percentage change uh they should pretty much look the same now uh but uh the percent change on the day uh resets uh before the market opens but the marked percent change basically accounts for the bid in the ask in the pre-market basically the mid price between them so uh one was able to see that gm uh was uh getting the lift this morning as uh looks like they're getting in gear with uh their eve electric vehicles i believe in some partnership with microsoft and you know going down the list you can see stocks like uh mgm resorts uh may be benefiting from uh hopefully the reopening although uh there has been some shutdown or back and forth as far as travel you can see other stocks on the energy front had been ticking up as well so kind of a similar view to what i was looking at uh in the pre-market now to add those columns all one needs to do is right click on any of the column headers and select customize and you can add whatever column that you want and then in this case uh let's see i believe it is just start typing in mark and you'll see various uh columns for mark and there's mark percent change now again i saw the question uh you know what is mark uh simple as far as on the mark is the midpoint uh between the bid and the ask price as typically what'll show up fairly close to the last price but as far as a technical reference it is the price that is in between the bid and the ask price and so that why by having the mark percent change you know we can see some of those bid and ask changes in the pre-market so you can just go ahead and double-click uh to add that to the column you can left-click and drag that up in the list or you can click and highlight it and you can use the move up or down to place it wherever you'd like likewise you can double click and remove any fields that you may not wish to look at all right okay so a few things going on there uh let's go ahead and take a look at a a couple of stocks um some of these are a little bit of a follow-up from what we were looking at late last week in the technical analysis workshop for instance here is uh ebay we can see ebay as a price that had recently broken out of a a triangle pattern got more of a channeling up stock more recently making higher highs and higher lows we can see a pullback you can see a pullback over the course of a couple of days after a sharp move this would be an example of kind of that flag pattern where one has a sharp swing and a pullback over several days a little more of a hammer in formation or uh i mean candlestick aficionados may consider this to be a dragonfly doji looks like a big of a dragonfly there and prices trading above the high the low day basically breaking out of that flag pattern there's no guarantee that that price will stay above that level and if we go ahead and pull this uh pull this out a little bit uh some of you that may struggle in identifying highs and lows in the trend uh we've utilized tools such as the williams fractal uh that is part of the pattern tool over here on the far right of the chart we go and click on that and select show patterns then we'll go ahead and do select patterns is part of the candlestick area so we go ahead and click on that candlestick tab bring up williams fractal with this little plot we'll leave the default settings on now this is not a real-time tool but it can be helpful on potentially some of these flag setups on measuring or looking at a previous swing from low to high not perfect like some traders may look at this as a previous swing and looking at this one even though a small consolidation as a another smaller swing but you can go back and take a look at you know previous moves in the stock and some traders may deduce well if it made a a swing like this in the past it may continue to make similar swings until that trend changes all right and again we can see a potential trigger with that as price trades above the high the low day uh some swing traders may look to enter as soon as it does that uh others may wait or look for more of a close um pros and cons the pro is if this ends up being a big update one is capturing that game make a mental note of that i'll share an example with ibm that we did two weeks ago as a good example of that however the con is if the price does fade then you know one may have a a losing trade a bit quicker okay uh now uh once again um so we have a particular possibly setting up for that hold now i saw in the chat uh not going to make a lot of reference on it today we'll probably spend some time with it next week but we do have some productivity tools that i share in the webcast that will potentially show ka holds or to hold setups basically the stocks that are showing up in green may potentially be stocks that are trading above the high the low day like in this case with valero probably take a closer look at this one in a moment um let's look at some other stocks you know like google price was trading above the high the low day and those shared script uh are uh here in the scratch pad and i'll also point your attention if you're very new to this is go to my twitter follow me at jmcnickel underscore tda and when you click on my picture or my profile i do have a pinned tweet that pin tweet basically is a little document when you click it open and has examples of some of the said script that is uh on the platform uh gives a explanation on what it does this case on the go hold looking for prices to close which during the day is actually the last looking for closes above the high the low day uh we'll even look for those harambe patterns which those you that join us in technical analysis those changes in momentum may imply a potential bounce the shared codes are right here for each one of them and the steps on adding them are right here at the top we won't be doing this today but we'll probably follow up a little more with this next week show you how we can screen and look for stocks that may have some of those similar setups all right so we'll go ahead and we'll close that out let's go back to the platform all right so we're looking at uh ebay bring that back up so you know a common uh approach as far as with this setup uh is uh looking at the low day and potentially setting a stop based off of that low day for our example we'll do about one percent below that low so we put our cursor on that bar uh you can see the low value which is right here on the top this should show the information for whatever candles you're highlighting so there we have a level of 5431. you go to the calculator we can take 5431 and we'll multiply that by 0.99 that should be a price level that'll be one percent below that low that'd be 53.76 for this example now what we can do is we can utilize our drawing tools such as a horizontal line and even plot you know where that potential stop would be now keep in mind if we put in a a stop loss at that 53 76 there's no guarantee that it would fill at that price once it hits that price it'll compete against other income and market orders there could be a little slippage there we'll just go ahead and make that 5376. you can even make this red make it a dashed line to kind of highlight that that's potentially where we'd have that stop and then as far as a target uh traders may go back and measure uh that previous move uh from low to high now we also have a a pattern that kind of falls within uh more of a a triangular pattern and so if you know one is looking for a larger move over a longer period of time you know they may target a a larger move now sometimes these previous moves as well may correlate with previous highs so for instance uh here on 1014 you know that was a high of about 58 34.
let's just go ahead and just kind of highlight that high if we go back and take a look uh again kind of measuring a previous swing or a previous move we can again take a diagonal line do is i'm going to remove some of these previous drawings here go to the drawing tool take a diagonal line and you know one could go ahead and draw from that low to high you can right click activate the drawing and then go ahead and measure it out now in the case of the flag the starting point would be the low day because if we're looking at swing swings are from low to high so that is anticipating uh that being the low day and as you go ahead and take a look you'll notice that that swing would put us you know a bit higher than that previous high now some traders may have one target or multiple targets you may use that as an example to possibly scale out of a trade as it hits different points so what we'll do on this example is uh we'll do an example of a stock trade and do a bracket order uh those of you that have been following me you know we've done multiple types of orders so in this example let's say we go ahead and uh i'm gonna right click in fact what we'll do is uh i'm gonna do this two ways here so let's say we got one target at around 58. and another target at let's say uh 61 in fact we'll do is i'll make it a little bit uh make it a little bit lower than that let's say about 60 75 a little below that target there you know we've taken a theme on doing different types of uh orders uh to manage the trade such as conditional orders uh let's say for um for this example what we'll do is maybe do a combination trade where we may have enter into a position at the same time but maybe have multiple exits where if it hits one target it may close out part of the position and if it hits the other target it'll close out the rest of the position and we can use conditional orders uh to go ahead and do that so let's see if we can put this together and again this is predicated that uh prices will remain trade above the high the low day and uh you know as we kind of look at it here is the high the low day which is 55.71 price is actually fading back uh onto this level here i'm still going to do this for illustrative purposes but this does illustrate you know kind of the the issue you know on entering a trade earlier in the day if it does fade you know then that may uh be uh more of a quicker loss all right uh one of the triggers that that we may look for is if price is going uh 20 cents above the high that low day notice that conditions not met now what i can do is i can put in a condition if the price does write itself and trade higher to go ahead and do that so what i'm going to do is i'm going to right click you know approximately around that level make sure you got the right price so that high is 55.71 so let's say we'll have a trigger that's 20 cents above that that would be 55.91 so i'm going to go
ahead and right click on the chart and we're going to do a a buy custom and i'm going to do a i'm gonna do a buy custom uh with stop we're gonna change this now i actually already have a template so let me as far as matter of expediency let me see if i can go ahead and bring that up i titled it combo swing trade and actually that didn't and what it does is see if i can do that one more time right click we'll do uh buy custom may actually not be set up there we go okay what this is is an example of a buy custom that triggers two oco orders and notice in this example i have an a hundred shares for the entry but the exit is actually split in half 50 shares closing out at one level 50 shares potentially closing out at another level so if i wanted to go ahead and reconstruct this we can do that by again go into the chart and once you construct it you can save that as a template so i'm going to right click and uh i'm going to do a a by custom my custom will do with oco bracket and then under the advanced order where it says first triggers oco we're going to change this to first triggers to oco and you'll see that there's actually a bit of an error where it says it needs exactly five orders to do this and what we can do to change this is i can right click on the existing cell order and create duplicate order and then i have to go ahead and right click on it again another order and you know create a duplicate or an opposite order actually did not want to do that let's uh change that to a cell so basically need to have multiple of five orders now by adding these two additional cell orders this is another oco bracket now to kind of complete this let's since we're still on the cell side here we want to make sure that both of those say gtc for good till cancel i want those orders to continue working and we can see as far as on a typical bracket order one order is a limit which is the target price the other order is a stop order we want to make sure one of these other ones also says stop okay now as far as setting up the trade uh on the buy side we're looking for price to be trading higher and to enter at a higher price so we're going to use a stop order if the price trades higher to enter into that trade and i believe we said that as far as that trigger 20 cents above the high uh that should be 55.91 which is actually looks like it's doing it as we speak we're still going to run through the motions here we'll make the stop 55.91 that'll be the trigger price then we can specify how much over that price we're willing to uh pay for it this will account for after hours or if there's a gap after hours when the market opens the next day you know one's not paying more than they intend maybe make it a you know about a 20 cent difference yes i can say like 56 56 11.
and so if this condition is met it will attempt to fill this order then on the exit we want to go ahead and put in our stop which our stop was 53.76 so i'll make each of these 53.76 hit enter and so as far as the if the trade goes against us we want to make sure that uh the stop is the same now i also need to go ahead and change the number of shares over here to split however way we want now some traders may do 50 50. you know one may do a third and whatever works for you we want to make sure that stays the same so in this case we're splitting it down the middle kind of 50 shares on each trade all right so we're almost there the last thing is as far as the limits you know what's the desired outcome and so you know we had two potential uh exits based off of the previous high and the overall swing target now there is an earnings event so one may make a note to possibly close out the trade prior to that event which is february 3rd uh based off of previous moves looks like we may have enough time for that example to play out we'll monitor that so let's go ahead and modify those limit orders uh one was 58 23 good mark that and then the other limit was 60 75 and we'll plot that now notice there's quite a few moving pieces here folks and so very important on the confirm and send to double check uh what you're doing so i'll hit the confirm and send and what this is going to attempt to do is buy 100 shares of ebay with a stop trigger uh a stop order of 55.91 and buy at the limit 5611 or better if that fills it will put two oco bracket orders in play these would basically both work uh independently and there's where the exits would be for 50 shares whether up or down and here's an example for where the other 50 shares would potentially be up or down now what i can do is let me go back and edit you'll notice uh on the bottom when you create these orders you may see a little floppy disk some of you may remember that uh you actually put a little something in the computer that actually saved things and you can take it out save it for later or lose it so there's a little floppy there if i click on that this is where you can save that template and so you know i can call this again swing combo i'll put a number two on it since i did do it previously and click save and that saved it as a template now i'm do is i'm going to do a confirm and send and we'll send this one through and oh that is interesting uh i lost some buying power i must have uh have been put some stock or something like that or have to double check uh on the platform there i'll go ahead and i'll place this uh after this class and see what's going on that is pretty odd um a little quirk with the uh holiday weekend but i'll go in i'll place that through now if uh if i go in and take a look at another stock such as valero which may be doing a a similar setup it was kind of again similar to a triangle warming up already kind of set up an example of a potential target based off the previous move you know one may look at a practice trade doing the same thing and if i go ahead and right click on the chart since i saved that template i can go to buy custom and in my templates i should have an example there's that swing combo to bring that up and notice it already defaults to the number of shares that i'd set up the time and force on the orders so really the only thing that one would change would be the number of shares uh and you know reflective off the price as far as your trigger prices you know where you'd set the limit stops things like that okay so if you learn something new at that now this is just one of the many uh ways of placing orders if you go back and look at the archive uh for this swing trading class we've done multiple types of orders with stock in this example we've done it with options and we've also have done different types of exits such as trail and stops and we'll continue utilizing some of these as well if you go back on that education tab whether again on the thinkorswim or on the td ameritrade website education go to webcasts you have the upcoming webcasts uh for today such as james boyd with using stocks using options as a stock investor but if you go to the archive tab you can see our previous sessions and if you look by instructor here's truly john mcnichol if you go back and look at the ones titled swing trading you can see examples of utilizing different types of orders and we've been on a theme with those stops as an example the one that we did i believe on january 5th and this is a good example we'll talk more about different exits next week but a good illustration of or a swing trade we did this on ibm which does have earnings this week is on how quickly things can move and come back what we did here was we actually put in an order as price was breaking through this resistance we actually placed it uh i believe uh placed it in the morning it triggered at around lunchtime and then early the next day it actually closed out at the target selling into that strength and we actually got out closer to around that 131 and we did an example of an option trade now notice that price did back off of that and maybe forming another pattern which can be another opportunity but the example of the trade you can see very quick that's what some swing traders may look for is those quick wins entered the morning closed out uh uh closed are actually entered in the afternoon closed down in the morning of the next day i paid 550 for the option and it was 845 sold that was about three dollars per share uh on a on an option contract so pretty quick uh utilizing some of these same conditional orders that we're teaching you so kind of plan to trade trade the plan uh we'll continue doing that and we'll encourage to practice what you learn here as well and so let's go ahead and bring up our disclosures and wrap this thing up so we went ahead and reviewed the market open i started taking a look at those swing setups uh attempted to do a practice trade off to go and take a look and i'll uh resubmit that see what was going on and we looked at our previous trade example once again we'll continue doing this each and every week uh we'll uh continue working with uh trailing stops as well on managing potentially profitable trades and looking forward to you joining us at that time so remember folks in order to demonstrate the functionality platform we had to use actual symbols keep 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 have a wonderful day folks cameron thanks for helping out on the chat we'll talk to you again real soon bye now you