Swing trade ideas in trending stocks, for the week of April 12, along with educational comments. Stocks mentioned: $PTC $LUV $VLO

PTC Inc. (PTC)

Overall, strong uptrend. If you check the retracement levels on the pullbacks during the uptrend, most have been between about 30% and 50%…and the current pullback is also in that area.

I don’t love the strong selling we saw in late March. With a drop like that there is the possibility that we could see a bit more of a drop. That said, we are seeing the price stabilize and that’s a positive.

Reward to risk is decent at about 2.7:1. If we do see a bit more of a decline, I want the decline to be weak and then stabilize again. If that occurs, a second long positions can be taken (if the first is stopped out).

There is a little lesson in that: traders can vary the strategy slightly by adding their own touches. For example, on many of trades, I do like to wait for the price to try to push lower. If it does, but it can barely make a new low before rallying again, that is good (see my chart comment on LUV below)! It shows more evidence that the selling has dissolved. It requires more patience, and may also mean missing some trades that just shoot higher, but some losers are also avoided. It’s a trade-off and a personal decision on whether you take trades signals as you see them, or if you wait for a bit more evidence (like the false downside breakouts, or another little drop that quickly stalls out–both show waning selling pressure).

For these new charts, to zoom in, just click Full Screen, and click Full Screen again when you are done looking and want to continue reading.

Southwest Airlines (LUV)

This one just moved out of the buy zone recently, but was another nice setup. There are times that I will get out of a trade if it moves aggressively toward the target but then comes back to the entry point. With that sharp move higher the price should be able to make it to the target before moving back to the entry point. If the price moves to the entry point, that starts to look a little more grim for the longs as the price would have just put in a lower high. In that case, if the price keeps falling that would be a head and shoulders pattern. Think ahead…think about what is forming, as it is forming. It doesn’t mean that pattern will materialize, but with that very deep pullback we need to be a bit cautious.

Valero Energy (VLO)

Here is one with a different look, as the price is forming a triangle pattern. This happens quite often. Pullbacks (during an uptrend, or downtrend) aren’t always just a clean temporary decline (we buy) and then a rally to new highs. Lots of times this sort of pattern will develop, or a sideways range. The pullback buying method is still valid, assuming the lows of the pattern where we buy are still in the strategy entry area (for uptrend).

Buy near the lows of the pattern using the consolidation breakout method. BUT, if you price has already made a couple waves within the pattern, be conservative on the target (exit near top of pattern for short-term trade). The longer the pattern lasts, the more you will likely want to wait for a false breakout to tell you the bigger move is coming. In this example, I prefer to wait for the price to drop below the triangle, AND THEN rally above the recent consolidation (or any future consolidation that may form) to trigger a long trade. To me, this would help signal a bigger move is coming, so the convention target method can be used.