Why It Pays For An Intermediate-Term Trader To Understand Day And Swing Trading Techniques
Let’s take a look at some charts of Anthem Inc
(
ATH |
Quote |
Chart |
News |
PowerRating).
This first chart is a weekly
chart:
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You can see that Anthem has
been forming a base since the second week in October. From the middle of
February to the end of March, ATH made a nice move up from its low of $53.00 to
a pivot high of $67.88. After making this pivot high, ATH spent last week
forming a handle. This handle was just barely high enough to consider acting on
from an intermediate standpoint, as the midpoint of the handle ($65.84) was
slightly above the midpoint of the entire basing pattern ($64.25). Intermediate
term traders would have seen ATH move out of this handle today, though on lower
volume than desired. The break of the high of the handle is the trigger that
intermediate term traders would normally use to purchase a stock. Sometimes you
can effectively lower your cost by taking an earlier trigger.
The early trigger in this case was pointed out by Dave Landry in his
April 10 column. Dave mentioned ATH as a swing trade candidate based on its
pullback from a strong uptrend. This can be seen on the daily chart.
 
If you’re an intermediate term
trader, and you understand day and swing trading techniques, you may be able to
spot early-entry opportunities like this one. When used effectively, they can
help you reduce you risk and enhance your overall returns. Whether today’s
breakout ultimately succeeds is still very much in question, but those that
bought the stock using the swing trade trigger are $2.00 ahead of the game, and
now have a bit of a cushion in case the handle breakout doesn’t follow through.
For additional thoughts on buying before the breakout, see Greg Kuhn’s lesson, “Scaled
Buying: How One Professional Hedge Fund Manager Does It.â€
From a market standpoint, we
are still in the trading range I have been discussing for weeks (recent highs to
the 50 day moving averages). Today was nice from a price standpoint. Volume
wasn’t great, and the VIX is now at its lowest level since June 11, 2002. This
leads me to believe that a quick and convincing move through the recent highs is
unlikely. At the very least, I think the market still has some more wiggling to
do before it can break through those levels. Long side trades at these levels
are carrying some additional short-term risk.
Best of luck with your trading,
Rob Hanna
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