Stock Market Outlook And Swing Trading Watchlist - Saturday, Oct. 17

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.

(Click on image to enlarge)

S&P 500 chart with indicator for assessing whether to swing trade stocks on the long side

  • 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.

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Disclaimer: Nothing in this article is personal investment advice, or advice to buy or sell anything. Trading is risky and can result in substantial losses, even more than deposited if using ...

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