July 26, 2011 at 11:21 am | | Comments 10

Day Trade or Swing Trade? Progression of a Play

One of the things I’m asked about quite often is how I decide my timeframe for a good setup.  Will it be a day trade or a swing trade?

That’s a great question, and it took me a long time to figure that out.  I go in-depth in the Advanced Trading Course at to explain it fully, but one component in the decision is the pattern quality.  That’s going to encompass the risk associated with the trade, which means entries and exits are more defined by a cleaner, mature pattern vs. one which is simply building.

So rather than just talk about it, I wanted to show you an excellent example from last week of how a stock can go from being simply a day trade candidate to a swing trade candidate when the pattern matures.

I had run across CROX pulling back from its 7/7 high on 7/11.  The uptrend was still very much intact, and this looked to be a potential dip to buy once the dip was completed.  Here it was at that time:


Chart courtesy of TeleChart

CROX needed to be watched a little longer before a play was evident, as I wanted to be able to draw a clean trend line along the highs and then go long on a push through that trend line.  Sometimes you have to wait on the market.  It took a couple of days, but I finally listed it for subscribers on the night of 7/13 for a day trade the following day.  It wasn’t a fully mature pattern, so I was only interested in grabbing the next pop if it occurred the next day (7/14).  Here was the setup, which didn’t trigger (it stopped a few cents shy of clearing the trend line, therefore no trigger):


Chart courtesy of TeleChart

Despite not triggering an entry for a day trade, I kept CROX on the radar nonetheless.  After two more daily bars had been painted on the chart, a cleaner trend line could be drawn, and the pullback had the appearance of greater stabilization.  I then set up a swing trade since the pattern was more mature, the pivot was more evident, and a stop loss area was now well-defined.  Here was the setup I posted for subscribers along with a $26.60 entry trigger price, a $25.70 stop loss (just beneath newfound support), and upside targets at $28 and $29:


Chart courtesy of TeleChart

From there, CROX triggered an entry on 7/18, dipped for a day on weak volume, then got back on the move.  With Target 1 at $28, the stock stopped just a few cents shy of hitting that level on 7/21, creating a bearish engulfing bar.  However, I stayed with the trade since volume didn’t confirm distribution, and the following day the stock blew through the $28 first target on much heavier volume.


Chart courtesy of TeleChart

CROX pushed all the way to Target 2, topping out exactly at $29 on Monday.  That offered a nice quick 9% gain, allowing me to book a solid profit ahead of the August 1st earnings announcement (which I always avoid).  Here’s a look at the final bar of my trade:


Chart courtesy of TeleChart

Several takeaways…

Allow setups to determine your trade timeframe. I’ve said it many times, but the smaller the pattern, the shorter the trade should last.  Bigger patterns can be trusted for more, it’s just that simple.  This started out as a day trade candidate but evolved into a swing trade setup after the pattern grew and matured.

Be patient as patterns build. I stalked this stock for several days before placing a trade.  Waiting for stocks to “come to you” is the best way to improve your odds of success.  Risk management is crucial, pattern awareness is important, and position sizing is not something to ignore.  However, it all begins with making a limited-risk entry, so timing is everything.  Don’t rush the process.

Monitor the volume in relation to the price action. This stock made a few moves which, based on price alone, would have made me wonder.  The trigger day saw a weak finish.  Four days into the trade a bearish engulfing bar could have spooked me out.  But neither were confirmed by volume.  Instead, I kept seeing volume expansion along with advances in price, which gave me conviction in the trade and allowed me to stick with it.

Stick with good trades and don’t get shaken out. Along with the previous point on conviction, staying with a good trade can be tough.  The price action or the overall market activity can cause premature evacuation.  Stick with your trade plan and what the overall trade is doing.  If it pulls back but volume’s weak, stay with your existing stop.  It could just be a head fake on the way to much higher prices.

Hopefully this walk-through helps you understand better how I determine my timeframe for a trade.  Beyond that, this review should also give you some insights into managing trades along the way, because learning to assess how a trade is developing is a critical skill you must possess for trading success.

If you want to know what I’m trading tomorrow, stop by the site and begin your trial to our stock pick service.

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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  1. Good deal.

    And quite ironic. I did the exact same play!!

    Seems to have rolled back over for now though. I’m out but still watching.

    Now if you tell me you are long CIEN that will be too much!

  2. I’m too familiar with each of those bars. I was in on the first penetration and out with the long engulfing bar.

    I try to avoid low betas but food has been pretty solid.

    Your comments are valued. I have run your Worden webinar several times. I trusted what I saw and heard then and, as I read your materials I continue to trust and value.

    I sold ZAGG this afternoon for a nice seven day gain. JAVA was good a few weeks ago, until the day traders started ganging up on it. It is back today where it started at 19.
    eom and best wishes…

  3. I tried to short JVA today but Ameritrade didn’t have any shares to short.

    One of those I wasn’t too upset about it. It should shoot back up any time.

  4. could, not should


  5. Thank you Bill, I appreciate you stopping by. I’m also glad you’re finding the posts here and those Worden webinars useful! Good work on the ZAGG play, keep it up.

  6. Hey Rob, sometimes you can call and have them locate shares to borrow for shorting. Not always, but worth a try when something doesn’t readily have shortable shares.

    No, not long CIEN…it’s in a downtrend so I have zero interest there (lower lows, lower highs = avoid on the long side for me).

  7. Ha ha!

    This is why YOU have a stock recommendation service and I DON’T!!

    Yesterday I decided to play with the old Elder Triple Screen and I analyzed all the stocks in my watchlist on a weekly, then daily timeframes. (still not sure what the third screen is)

    CIEN was immediately DQ’d as a long candidate due to the weekly.

    I’m getting my feet wet with this again after many years away. Rereading old books, reliving old mistakes, etc. I’m staying small this time though, taking little 300 share positions.

  8. I have trouble staying in a stock, and i lose out on big winning stocks. Thanks for explaining the weak volume headfake. It was very helpful.

  9. Thanks for stopping by Kenny, glad it helped!

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  1. From Day Trade or Swing Trade? Progression of a Play | | Tips on Sep 3, 2011

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