Alan Farley - 3 Swing Trading Examples, With Charts, Instructions, And Definitions To Get You Sta.pdf - Giełda książki fajna kolekcja - sylwian44

The following examples cover common areas of swing trading that will provide insight into the

mechanics of the swing trade. Following the three examples, I provide a glossary of terms that are

essential to understanding the basics of swing trading. I hope the combination will set you on

your way to success.

Amazon.com (AMZN:Nasdaq) [dated 11/20/01]

Net stocks aren't flying very high anymore, but they're still setting up nice swing trades. After

getting pummeled for months, many of these stocks are bouncing off multiyear lows. Driven by

optimism that things can't get any worse, market players have finally reawakened the Net rally.

But pick your trades wisely. With few exceptions, Net stocks face an extraordinary burden of

overhead supply. Vast legions of investors and institutions are still holding these stocks from

much higher prices. They will sell out their diminished portfolios for years to come.

Many of these stocks are now trading in the single digits – a situation that demands careful

evaluation of position size and risk tolerance. The good news is the massive liquidity and small

spreads of the sector's largest stocks. These high-float issues can trade all day with a single penny

marking the difference between the buying and selling price. This small transaction cost has

another advantage. We can safely juggle in and out of a position several times to catch the best

entry price.

Most Net rallies are only bear-market bounces. This fact raises the odds that resistance at stocks'

200-day moving averages will extinguish their progress. In fact, the king of the jungle we'll look

at today should encounter that gorilla very soon.

So play the Net rallies and enjoy the good old days. But keep those stops tight and take what the

market gives you. Fortunately, that could be double -digit gains at these discount prices.

3 SWING TRADING EXAMPLES, WITH CHARTS,

INSTRUCTIONS, AND DEFINITIONS TO GET YOU STARTED

By Alan Farley

Amazon.com (AMZN:Nasdaq) got crushed when the bubble burst, losing over 90% of its value.

But times may be changing for the online retailer. The last few weeks finally delivered some

good news and the stock rallied about 50% off its October low. It now sits just under $10. Not a

huge ramp for the former giant, but accumulation suggests a bottom may near. Notice the big

move on Nov. 14. It drove Amazon above its 50-day moving average, right into a test of the last

high.

While volume shows investor interest, Amazon could be headed into a broader basing pattern

instead of a breakout. Notice the lines drawn across recent highs and lows. They take on the

appearance of a partially developed symmetrical triangle. A stock needs to eject quickly out of a

box like this, or it can easily drop all the way back to the lower trend line.

The volatility zone between $9.50 and $10 raises another caution flag. As you can see, sharp

reversals characterize these price levels. Why does this happen? Certain chart points hide

significant numbers of traders and investors sitting in losing positions, because they bought into

sudden reversals. This volatility needs to be unwound before price can move past it.

The key to this trade is the market number $10. If Amazon can mount it, it will complete two

bullish patterns and draw in new buyers. First, it would trigger a cup-and-handle breakout on the

shorter-term chart. More importantly, it would confirm a well-formed double bottom on the daily

chart.

The best trading plan might be to go long before the breakout. Consider a position using the

intraday pattern, but be prepared to exit quickly if larger forces intercede. For example, a break

above the small triangle could offer the perfect entry for a larger price move. But avoid any

position near the bottom of this pattern. It has the look of a bearish descending triangle. We could

see a decent selloff if that lower line breaks.

Concentrate on good trade management if you work this position into a profit. As I mentioned

above, strong resistance will stall most bear-market rallies at the 200-day moving average. This

formidable barrier is sitting near $12 on Amazon's daily chart. The hot spot also crosses the major

down trend line for the entire postbubble collapse. We should take our profits if and when price

approaches this danger zone.

Nvidia (NVDA:Nasdaq) [dated 12/04/01]

Computer gaming has traveled light years since Pong was first released in the 1970s. Fortune 500

companies now cater to a game habit measured in the billions of dollars. In fact, 2001 industry

revenue will rival worldwide movie and DVD sales. This time-wasting endeavor has moved well

beyond its core teenage audience into a variety of demographics.

The game sector also represents an endangered species for traders: a technology bull market.

Enthusiastic buyers are loading up on a new generation of boards, boxes and game titles. Equities

keep running to catch up with this strong demand, and most stocks sit very close to multiyear

highs.

You can attempt to profit with trade setups in the gaming sector. But forget about direct plays on

the boxmakers themselves. Microsoft (MSFT:Nasdaq) (Xbox) and Sony (SNE:NYSE ADR)

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