Stock market outlook for swing trading stocks, as well as swing trades that are setting up in the US and Canadian markets.

The stock market remains favorable for taking stock swing trades on the long side.

I look at several indicators of market health and none are flashing any major warnings signals.

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• 68% of NYSE stocks are above their 50-day moving average. That indicates lots of stocks are in short-term uptrends which is favorable for long swing trades.
• Price action is recovering from the September decline. Still in a short-term uptrend since late September, amidst a longer-term uptrend since March.
• No single-day drops of 2% during this rally since late September.
• NYSE Advance-decline line made a new high on Oct. 12, and the S&P 500 has not made a new high yet. Historically, this type of positive divergence has indicated that the S&P 500 also makes new highs. Given the proximity to the highs, the S&P 500 is likely to reach new highs within the next couple of weeks (likely sooner).

These indicators are only as good as their last reading. The market could plunge next week. That’s ok. Each trade has a stop loss attached to it, and then we don’t take any new long trades until conditions improve again based on the indicators.

Stock Swing Trading Watchlist

There will always be winning and losing trades. Losing trades can’t be avoided. DHI was on the prior watchlist. It broke out on Oct. 16 and then quickly reversed. It was a good looking setup. It is quite possible that trade could get stopped out. If it does, I’ll lose a little less than 1% of my account. These losses are compensated for by having bigger wins.

US Swing Trading Watchlist

The following watchlist is based on the continuation patterns strategy and the cup and handle pattern strategy.

Here is the scan I used. I expanded the Price vs. 52-week High % to >80 (this means “find any stocks that are within 20% of their highs”). Usually, it was sitting around 90%, but I found that setting eliminated a few really good setups in more volatile stocks.

167stocks on the list. Then I filter through the results for valid patterns. This is a manual process, so sometimes I miss things. If you see a good looking pattern, share it in the comments.

I didn’t see many stocks contracting right now, or in double consolidations, because most stocks on the scan list broke out recently. This makes sense because I took a number of trades in the last couple of weeks. So that is the cycle. Some weeks there are more stocks to trade, and other weeks there are less. Don’t force it. If you don’t see much, trying harder to find something will likely mean trading poor setups.

LVGO (recently triggered to the upside, but stalled since)
NOVA (starting to contract..must tighten up a bit more and want to see volume drop off)

DHI also still has a valid continuation pattern setup, but it had a false breakout on Friday and is nearing the stop loss. We’ll see how that plays out next week. See last week’s watchlist for that setup. TSLA is also on last week’s list, along with UTZ.

The next two (bottom two on the chart) align more with a cup and handle pattern.

ZYME (needs to consolidate)
BBIO

Note: all these companies have earnings out within the next few weeks.

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The stock below has a pattern that a few people have asked about recently. It looks like a small cup and handle, but there is no contraction for the handle, just a consolidation. I am not trading this pattern currently, but keeping an eye on how they do. I have avoided these because a bigger contraction tends to form more often than not, resulting in multiple false breakouts and losses if trying to trade these orphaned consolidations. That said, under certain conditions, they may work well, so I am keeping an eye on how these patterns act.

MELI

Canadian Swing Trading Watchlist

Here is the scan criteria for Canadian stocks.

68 stocks on the list.

TOU.TO (Wait for consolidation near $18. Working higher against longer-term downtrend, not ideal).
MMS.V
SLVR.V

ABR.V is also still setting up. It was on last week’s watchlist.

The stock below has a pattern that a few people have asked about recently. It looks like a small cup and handle, but there is no contraction for the handle, just a consolidation. I am not trading this pattern currently, but keeping an eye on how they do.

GSI.V (bottom right on chart below)

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