Swing trading offers a unique opportunity for traders to capitalize on short- to medium-term market movements. It’s an approach that balances the intensity of day trading with the patience of long-term investing.
This week, we’ll explore three swing trading setups that are perfectly aligned with current market trends and offer high potential for profitable trades.
The Importance of Sticking to Proven Setups
In volatile markets, it is hard not to deviate from time-tested strategies based on the premise of making rapid profits. However, sticking with setups that correlate with the conditions of the present market is fundamental.
For example, last week’s setups on SNOW, MARA, and PLTR showed strong directional momentum, garnering substantial profits for those adhering to the plan. In this regard, the results call for trading in price action instead of biases.
As long as the current setups continue working, that is where the focus should remain. When market dynamics change, then it will be apparent, and moves can be made. Until then, it’s to stick with what works.
Swing Trading Setup 1: Netflix Breakout
Netflix is an attractive breakout this week. The multiple timeframes are perfectly aligned, making this attractive for a swing setup. Here is the exact plan:
Entry Criteria:
Seek a trade when Netflix prints a breakout above resistance within the $560-$570 zone. The security has to close above this resistance with a solid higher low support and momentum.
Stop-Loss Placement:
Place stop-loss below the intraday low or the recently printed higher low.
Profit Targets:
- First Target: $580-$585. Trim a portion of the position.
- Final Target: $600. Close most of the position.
Lock in profits as the stock moves higher by using intraday higher lows for trailing stops.
Swing Trading Setup 2: Meta Breakout
Meta, similar to Netflix, shows great breakout potential. However, the trader must be careful as its levels are stretched and its RSI is at a very high level. The plan on Meta is to:
Entry Criteria:
Breakout above Friday’s high on the $474–$476 range and confirmed by support in the day and an uptrend.
Stop-Loss Placement:
Under the day’s low or the most recent intraday higher low.
Profit Targets:
- First Target: $486 (near the earnings gap high).
- Second Target: $490, with the ultimate target at $500.
Because Meta is overbought, this trade should be held for only 1–1.5 days. Use tight trailing stops to keep the risk as small as possible.
Swing Trading Setup 3: Backside Shorts in Low-Float Stocks
The third setup is for shorting pops in low-float stocks that have shown huge moves but are now on their backside. Examples include names such as HKIT, TO, and MLGO, which have made huge moves last week.
Key Takeaways:
- These names tend to fail at key resistance areas and present an opportunity to short.
- Set alerts for supply areas or prior failure points.
- Keep an eye on the leader stock, such as HOLO, for a liquidity event or squeeze that could affect sympathy plays.
Example Strategy: TOP Short
- Entry: Watch for a push up into the $5.50–$6 range, which would be into the 2-day VWAP.
- Stop Placement: Above the intraday high at the resistance level.
Profit Targets:
- First Target: Mid to low $4 range.
- Second Target: Sub-$4, with potential all the way down to $3.50.
This is a good risk-reward setup and may work over 1–2 days.
Adjustment to Market Conditions
The setups will be a success in relation to current market conditions, which still favor breakouts and directional momentum.
One always needs to monitor changes in market conditions and make the appropriate adjustments. Monitor key indicators and the overall market strength to determine when to adjust.
Are you watching the same stocks this week? Do you have alternative setups or exit strategies in mind? Sharing insights among the trading community can refine strategy and discover new opportunities.
Conclusion
Have a good trading week ahead of you, and may these swing trading setups based on proven strategy direct you toward profits!