Steve Palmquist.Author of ‘The Timely Trades Letter’. ‘How to Take Money from the Markets’, and Money-Making Candlestick Patterns.
When the market breaks out of a basing pattern, as it did last week, it makes it easier for strong stocks to run. When the market is basing, most stocks tend to run a bit, then reverse. When the market breaks out more stocks tend to move above their trigger points and they tend to run longer. I always want to be adapting my position sizing, and the number of trading positions I am using, to the current market conditions. When the market is in a basing pattern I use smaller than normal position sizes and trade fewer positions. After the market breaks out of a base I am willing to use larger position sizes and trade more of them. Using smaller position sizes during more risky market environments helps preserve previous profits.
We saw nice moves in a number of the swing trading setups from the last Letter including AAPL, AAP, TSCO, ULTA, PVX, VOXX, and AWK. Most of the setups rose above their trigger points and kept moving up into their next resistance areas, thus providing nice profitable moves. I followed the standard prioritization process outlined in previous Letters for selecting the trades I wanted to enter. I took profits on trades as they approached their upper Bollinger Band. The market is moving and so are our setups, nice week.
As noted in previous Letters one of the the sweet spots for holding swing trades is three to five days. A number of systems show interesting results just using a time stop and exiting after three to five days. The rule I use is to have a good reason to hold after three days. When the market is bullish there are often good reasons to hold such as more room to run to the next resistance area, not very extended above the fifty day moving average, moving on strong volume, etc. If its is not clear that there is a good reason to hold, then I happily take profits and move on to the next pattern that is breaking out and just starting its run. I am not trying to hold on for the last dime in every position, there is no way to do that consistently. I am trading patterns, not stocks. When a setup moves and becomes extended I would rather ride a fresh horse than one that has been running for awhile and may be tired.
We saw nice moves in a number of the swing trading setups from the last Letter including AAPL, AAP, TSCO, ULTA, PVX, VOXX, and AWK. Most of the setups rose above their trigger points and kept moving up into their next resistance areas, thus providing nice profitable moves. I followed the standard prioritization process outlined in previous Letters for selecting the trades I wanted to enter. I took profits on trades as they approached their upper Bollinger Band. The market is moving and so are our setups, nice week.
As noted in previous Letters one of the the sweet spots for holding swing trades is three to five days. A number of systems show interesting results just using a time stop and exiting after three to five days. The rule I use is to have a good reason to hold after three days. When the market is bullish there are often good reasons to hold such as more room to run to the next resistance area, not very extended above the fifty day moving average, moving on strong volume, etc. If its is not clear that there is a good reason to hold, then I happily take profits and move on to the next pattern that is breaking out and just starting its run. I am not trying to hold on for the last dime in every position, there is no way to do that consistently. I am trading patterns, not stocks. When a setup moves and becomes extended I would rather ride a fresh horse than one that has been running for awhile and may be tired.
AAPL moved above its trigger point during Monday’s session and ran up every day last week, gaining thirty five points. I picked up the AAPL trade on Monday and let it run during the sessions on Monday, Tuesday, and Wednesday. On Thursday AAPL moved above the upper Bollinger Band which is generally a sell signal. The reason for this can be found in the research outlined in ‘How to Take Money From the Markets’. My research indicates that one can develop an interesting system for shorting strong moves above the upper Bollinger Band. This also implies that if I am long and a position moves above the upper Band I should consider taking profits. I have extensively tested several trading systems, the results of this testing on specific trading trading tools are outlined in ‘How to Take Money from the Markets’, and Money-Making Candlestick Patterns. The testing process helps us understand how stocks usually behave after forming a specific pattern such as being outside the Bollinger Bands, showing strong distribution or accumulation, or pulling back or retracing during a trend.
