Tag Archives: break-outs

Part 2 of 2: Swing Trade $STUDY Review on ARCUS BIOSCIENCES (RCUS) Swing Trade Alert Trading Strategy.

“Down Trending Resistance Trend Line Break-out Swing Trade”. 

Below there are so many secrets to our swing trading success, in this article we look at the following areas of trading discipline for your trading plan:

• Determining bias according to market time-cycles,
• How to scan for swing trading set-ups,
• How to determine price extensions for realistic price targets,
• Support and resistance diagonal trend-lines, horizontal trend-lines, Fibonacci levels,
• How to manage execution of the swing trade set-up,
• How to manage trading stops, trade sizing, ebb and flow trade executions at support and resistance.

Part 2 of this analysis (below) is a Premium Member Only article and Part 1 can be found here;

Swing Trade Alerts Review: Traders $STUDY Guide “Trading Down Trend-Line Break-Out” ARCUS BIOSCIENCES Set-Up (Unlocked – Part 1 of 2)

Determining Time Cycle Bias for Your Trades.

Recently I wrote a few articles on the topic of time cycles in the markets using the Volatility (VIX) structured time cycles, this is a great place to start when determining first your bias of being bullish or bearish. In other words, should you be more focused on swing trades to the long or short side?

You can find Part 1 of the two part article here: How to Swing Trade Volatility $VIX Time-Cycles (UNLOCKED PT 1): Achieve Higher Gains in Stocks, Commodities, Indices, Crypto, Currencies and Theme Trades.

If the trajectory of market volatility is down (compressed) and you are more confident that volatility will be lower as you approach the next time cycle inflection then in most cases you would be bullish equities – this of course is just one example.

Alternatively you would be bias to the down-side for trading volatility so you may short $TVIX in this instance.

There are many ways to take advantage of the time cycles with various swing trades from Indices, Currencies, Crypto, Sectors, Stocks and more.

Just because the volatility is expected to rise or fall doesn’t mean however this should be the only determining factor when choosing theme trade set-ups, below is an example of just that with the ARCUS stock trade.

First, lets look at how stock scanning works.

How to Scan For Stock Swing Trading Set-Ups.

Good stock technical analysis knows before the news hits more often than not what the likely trade on each stock will be.

Technical analysis knows before the news hits because the stock will start to provide “tells” within the trade action of the stock and various technical points become clear.

So if you can know the TA of a specific stock better than most you have an advantage over other traders at all times because you can usually be ahead of the main part of the move.

Anyone, even the best fundamental traders would do better if they were also experts at technical analysis.

If the technical structure of the chart is suggesting a bullish move for example, you can then start to take small entries and build a position in expectation of a move.

The technical “tells” develop when insiders know something about upcoming news or even as geopolitical narratives are changing.

And then as you start to see specific technical trade patterns set-up in more and more equities you will find that this is a manifestation of the expert traders all beginning to bias their trades toward a theme usually within a sector, whether it be for a technical reason or a geo-political reason or perhaps some other fundamental or market sentiment reason.

If you get in “the pocket” right, you will find many set-ups during a period of time that will be almost identical and will provide excellent returns one after another.

This is what happened with our trading of the technical set-up in RCUS, many others were very similar during this time period in the markets and our returns increased rapidly.

I keep it simple and use Trading View for my scans. 

On any given day, usually sometime after lunch I will open Trading View and click on the fire emblem on top right side of screen – this is your hot-lists of hot stocks on the day (see screen shot of my Trading View below). You can set the scanner in Trading View for various levels and parameters. I scan the running stocks with large gains, the losers and the OTC markets.

I will open Trading View and click on the fire emblem on top right side of screen – this is hot stocks on day.

Then I simply open each chart (primarily scanning the hot stocks on the day) and I start with the weekly time-frame.

I’m looking for chart history or patterns of trade, chart memory or some semblance of chart history with some order. The simpler the chart patterns the better. Anyway, as you learn all the different set-ups this gets much easier and faster.

Every financial instrument I trade I make sure that it has a structure, some order is required or your trading edge is not increased.

When I find a chart set-up I like I open the chart and take a look at it on various time-frames and consider how to trade the stock, price targets and various support and resistance levels.

Then I look at things like incoming volume, company news, sector themes, geopolitical type things, look at insider buying or selling and various other research.

During the period of time we took the swing trade in ARCUS the trend-line resistance break-out trade was happening regularly and was providing excellent returns for 2 – 6x and even more in some cases wins.

When I Used the Scanner and Isolated the ARCUS Swing Trade Set-Up It Was Yet Another Trend-line Resistance Set-Up That Was Likely to Explode.

Below is the chart I found when scanning, it shows clearly the trend-line resistance set-up. The chart below is from one of the earlier swing trade alerts we sent out to members for this set-up. You can see the spike through the trend-line resistance (which occurred after the original alert). 

You can clearly see the down-sloping trend-line in the chart on the alert.

This set-up was on high alert because this specific trade set-up was hitting one after another, if this was not the case I wouldn’t have been so keen on taking these trades.

you want to be where the wolf pack is

It is the theme that is important, you want to be where the wolf pack is, where all the other winning traders are. Just a winning set-up isn’t enough. Just a news event or a fundamental set up on its own is not the optimal scenario, you want to be where the flow is. This is critical.

This chart swing trade strategy (setup) late 2019 early 2020 was found on scans regularly for big trader wins #swingtradealerts

And then as the trade progressed (after alerting the swing trade sometime earlier) the structure of trade was clear and it was just a matter of trading risk in ebb and flow (see chart below). 

It is important to note that we cannot alert every pull back and add and trim, it isn’t possible, what we do is get our members started in a swing trade and then endeavor to alert the key trades (especially key areas of resistance) as it progresses. Our trader’s platform (automation for alerts) will solve this manpower issue, but really every trader should be planning their sizing and support and resistance adds and trims for profit based on their own account risk, risk tolerance, style and more. If you are just blindly following another trader this will not work for you.

ARCUS BIO (RCUS) in bullish structure, decent action considering market this week, continuation for us $RCUS

Charting Price Extensions for Price Targets and Timing.

This can be more art than science and your price extensions and price targets may change as the price or timing of the stock price movements move along.

In the chart below you will see diagonal white arrows (3 of them). The angle is just a reflection of the down-slope (a mirror of the angle). The length of the price extension is simply a mirror of the down-slope trend from previous. So each of the 3 arrows trending up are equal in duration and price.

These are a simple way of taking a shot at the most probable price extensions.

One key note here is that often you will get 1.5 extensions or 3. Why I don’t know. If you look at the chart below that is how I determined my price target from 15.00 to 30.00 and in last weeks trade the price target was hit early.

You will also notice (in blue on chart) I drew in an Elliott Impulse Wave, but I do that more for fun to see if I can tell the exact future of the play, you can see in this instance I was close, but the bulls were more aggressive than I even thought they would be.

Swing trade chart with price extensions, price targets, timing, Fibonacci, support and resistance levels of trade.

Support and resistance diagonal trend-lines, horizontal trend-lines, Fibonacci levels.

In the chart above the diagonal trend-lines (charted in advance of trend-lines being there) are determined by taking the down trending price action of prior and extending the the tops of each lower high as the stock traded down in trend. the angle of the trend-lines was simply determined by historical trade.

The horizontal trend-lines (thin grey ones on the chart) were determined by simply drawing horizontal rays at the highs in the previous downtrend then duplicating to create a grid. These are not that important, I use them to see if there is a grid to be had. Why? Because I’m looking for order or structure.

And then the Fibonacci levels are simply done using your Fibonacci retracement drawing tool between the key support (or bottom of chart) and the price extension top. And then you copy and paste it up for each key leg in possible future trade. I always chart the low and high as horizontal key support and run them straight across horizontally on the chart as grey or green as these represent key areas of support and resistance.

How to Swing Trade It – manage execution of the swing trade set-up: Starter positioning, trading stops, trade sizing, ebb and flow trade executions at support and resistance.

Usually, when price breaks the trend-line resistance to the upside this is your trigger to be at least on watch for your initial entry.

You need to determine how many entries you are prepared to take. Hopefully it is more than one and preferably up to 10. Here is why;

When price breaks out upside the trend-line you want to be able to take at least a starter right away because most traders will wait until price returns to the previous resistance now support for the test of support and then go.

Some will even wait for it to bounce and get higher than the previous candle. All methods are fine but if you’re in it to win it then I would suggest taking 1/10 size at each of those three triggers I just explained. 

Why? Because sometimes price doesn’t come back to you. The stronger the theme, the stronger the market, the stronger the stock set-up the less chance it’s coming back to you and then you’re chasing it.

Now if you’re in 3/10 size or 30% size and your trade breaks down, you’re down on your trade but if you are winning 80% or better you can lose 10% 2 out of 10 times and win 30% or more 8 out of 10 times.

In the ARCUS example price never came back.

I look at every trade like a chess board, the more dot plots or entries and trims of profit the better, this is how we’re coding the 200 equities to trade under the machine trading program and how we’re coding the trader’s digital platform so members of our swing trade alerts will be able to see this real time. Until then, there is myself and three staff managing the numerous trades in various equities along with coding, alerts, newsletter publications and various other duties – hence the reason for coding automation.

Now, in the ARCUS example above you would have taken your starter 10 – 20% in size and it didn’t come back, what it did is it hit the first key resistance and then came back.

AT THAT RESISTANCE you need to trim 50% of your profit and then add to the trade at key supports in bits until it bounces and then continue with taking profits along the way at each key resistance.

Managing your trade size is critical. If you’re only going to be a one hit wonder, taking one entry for the win then you need to learn how to bring your charting down to a daytrading time frame so that you can execute your position on a lower time-frame of charting like a 5, 15 or 30 minute chart. I have an article coming on this discipline but in the meantime if you need to know how I do this ask me for a coaching session and I’ll show you.

Setting your stops is based on many things and this is why I don’t like publishing alerts with stops. This is determined by your experience (newer traders have to take more cuts because they don’t know what a prime set up is) so newer traders have to use hard stops religiously, I don’t because I know I can dot plot my way out of any trade as long as the stock isn’t destroyed by some black swan event.

In a black swan (market wide) I don’t worry because I’m in structured strong set-ups 90% of the time. If it’s not a strong set-up I’ll usually alert that or if its risky etc.

newer traders have to use hard stops religiously, I don’t because I know I can dot plot my way out of any trade as long as the stock isn’t destroyed by some black swan event

All of our trades we are sizing adds at support and trimming at resistance areas. There are many things that determine this also, such as market time cycles, market sentiment, sector sentiment, perhaps the technical set up is no longer being run by the bulls and many other factors.

False break-outs happen so you need to be prepared to take a loss, but when you get better at being able to determine key set-ups for all the reasons above and more you won’t be as concerned about that.

Other considerations technically speaking;

Most traders will wait for the current chart candle to close beyond the down-sloping trend-line resistance so they have a confirmed break-out, but remember, sometimes this won’t happen and a really bullish stock will just leave you in the dust.

Most traders will take their initial long starter position in the trade when the stock price has retraced back near or at the original trend-line, but again, this does not always happen and you can get left behind.

Most traders will set their stop just beyond failure of the trend-line but this can cause a trader’s account balance to be dwindled due to death by a thousand cuts.

The secret here is to not be most traders.

In this game if you are like most you will have like most (at best) returns, around 15% a year if you are lucky.

The traders that consistently post returns of 3, 4, 5 x or more per year are using a strategy that most do not.

What is that?

How did Wayne Gretzky explain how he played hockey? He had a knack at knowing where the puck was going to be so he went there.

“Skate to where the puck is going, not where it has been.”

— Wayne Gretzky

Same thing here.

Below is one of many of my rants on the subject, on my personal twitter feed;

If you get good at what I am describing above you will always know in advance (with high probability) when the price of the stock is going to move that you are trading, so manage the risk between where it is and where it is going like a chess board and you will see returns of 3, 4, 5 x or more per year.

Any questions email me anytime at [email protected].

Thanks

Curt