Swing Trading: Buying the Selling in Up, Down and Sideways Markets
I am not sure if it is true that there is always a bull market somewhere. But it does seem that there is always a stock rallying into strength after short-term weakness, regardless of what the broader market is doing.
Consider ^MHP^.
Shares of MHP pulled back for four days in a row heading into trading on Tuesday, and six out of the previous seven. The sell-off in the stock included two, new 10-day closing lows, three closes in technically oversold territory, and an overall four-day decline of more than six percent.
Yet shares of MHP gained more than 7% on Tuesday. And this on a day when the S&P 500 lost more than 2% and the Dow industrials sold off by more than 260 points.
This is why short-term stock trading in general and swing trading in specific is the #1 alternative to buy and hold investing. While investors around the world are getting ready to sell at the lows, swing traders using quantified trading strategies and a diversified approach can have success regardless of whether the broader market is moving up, moving down or moving sideways.
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Here are 7 Stocks You Need to Know for Wednesday.
Traders looking for pullbacks above the 200-day moving average may want to consider both the retail and energy sectors. While both sectors are selling off along with the rest of the broader market, many of the pullbacks in stocks in these sectors remain above the 200-day.
Based on our research, buying pullbacks above the 200-day moving average outperforms buying pullbacks in stocks trading below the 200-day when it comes to short term swing trading.
Shares of ^TIF^ plunged by more than 8% in Tuesday’s session, ending the session at fresh, 10-day closing lows after a three-day bounce. ^ANF^ shares sold off by more than 7% just one day after the stock rallied into strength above its 5-day moving average.
Pulling back for a third consecutive day ahead of trading on Wednesday were shares of ^JWN^. JWN slid by more than 5% in Tuesday’s trading session.
Among energy companies that have pulled back above the 200-day moving average, both ^WMB^ and ^EP^ have sold off for four days in a row and are now deeply oversold. Note that Williams Companies is scheduled to report earnings on Wednesday.
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Also reporting quarterly earnings on Wednesday is ^MA^. Shares of MA were down by more than 1% as the stock finishes lower for the fourth day out of the past six.
While MA is not yet in oversold territory despite its recent pullback, a drop of more than 2% has helped send ^V^ into oversold territory above the 200-day for the third session out of the past four.
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David Penn is Editor in Chief of TradingMarkets.com