Hello you very wonderful, kind and intelligent people. I sincerely hope you have had a good start to the week.
I was kindly wondered about a trading technique, i reviewed Meta on the Nasdaq and the last few days it has had more volume above its latest 20 day average volume. Over the last few days, this would have been a good swing trade for the last few days. I know there is lots of other indicators used for trading like Moving Average Oscillator. I kindly wondered please if this alone would be a good strategy for doing a small amount of swing trading please? I have practised this in a demo account with a few other stocks and it works well i really want to try a strategy that is not over complicated. If anyone kindly had any views on this i would be forever grateful and thankful for your time.
Sending you every best wish for a happy future and i hope you achieve massive success with your trading. Enjoy the rest of your day and take care.
Robert,
Almost not sure where to begin. Iâm pressed for time, but a couple quick comments:
ââŚmore volume above itâs latest 20 day average volume.â In the attached chart, yes, the last few days have crept slightly above the 20 day average. Not dramatically, but above. But remember, you can have huge volume on the basis of selling or buying. The bottom indicator shows the split between buying and selling volume. The 30th was largely selling but yesterday was largely buying. That in and of itself doesnât drive doing a trade. Most technically traders do NOT trade because of volume, but use it as a secondary indicator that there is significant interest and hence activity in the stock and the move in the stock is real.
You have to decide what kind of a trader you are trying to be. There are day traders, short term swings and longer term holders as a broad classifications. And then, there are those that trade on momentum, reversals, patterns, etc, etc. Iâm guessing you are shooting for momentum, but Meta has long left the building. It is likely that it will take a breather soon and you can consider trying an entry on a pull-back such as to a moving average or support level.
Please try to explain in more detail what you are suggesting as your strategy, itâs not clear to me. Sorry to do a rushed answer, I may have more time later and can try to answer better but please help by outlining more what you are trying to do.
But whatever, remember, you gotta do you. You need to make decisions as to what you what to do, not what somebody else does. Yes, you can learn from others, we all do all the time. But you need to sort out what you are most comfortable with. You may want to paper trade to see how you do.
As for âswing tradingâ META --or anything elseâ, you need to put together a plan --as Lakedog also notes-- that is based on what you want to try to accomplish. In short, you need to spell out for yourself what are your means, needs, interests, goals, and opportunities instead of getting sucked into whatever the current trading fad seems to be, or, worse, thinking youâve discovered some secret to trading success --like volume-- that no one else seems to be using.
Markets are complex enough that nearly anything will work some of the tme. But nothing works all of the time. Thatâs why ârisk managementâ is the most important part of your investing/trading program. Specifically, what are you going to do when prices move against you? That needs to be decided before it happens.
I agree with Lakedog and Arindam in that volume by itself is not enough of an indicator. I usually look at the volume to see if a recent reversal in price is accompanied by large volume. There are plenty of other things to take into consideration too. I am relatively new to short term trading based on technical indicators. I found that several brokers like Fidelity have free tutorials and webinars for swing trading available on their websites. Barchart.com also has some free tutorials. One book that starts from the basics is âSecrets for Profiting in Bull and Bear Marketsâ by Stan Weinstein. Those were helpful to me in getting started.
I have been looking at CMG and wondering if there might be a good entry point on a pull-back. It recently pulled back to 20ema, but that doesnât seem like enough of a pull-back considering how much it ran up at once in April. Do you have a particular moving average you would look for in these situations when the stock has been on a long roll?
So Iâm not sure what the âofficialâ definition of a pullback is, but from my perspective a stock enters a pullback when it is IN an uptrend and pulls back generally 3-10% and then continues the uptrend. CMG is NOT in an uptrend. It had a gap up on earnings but has been relatively flat subsequently. Itâs interesting in that it has remained relatively stable rather than having an immediate pull back after the gap up. It has entered into a squeeze, and if you follow that philosophy, it needs to be monitored.
Personally, itâs not a clear path and I would not focus much on a play for CMG. It could easily break from the squeeze, but itâs not strong enough of anything to make me want to set up a limit buy. Thereâs lotâs of fish in the sea. You donât have to force a trade. In the words of Al Stewart, âIf it doesnât come naturally, leave it.â
In general, when looking at pullbacks, itâs best to look at that stockâs history and what it tends to respond to. And prior pullbacks during the uptrend you are looking at are the most relevant. Listen to the stock itself.
Lisa,
Felt I should give you a little more detail in the answer. First of all, about pullbacks. I hope in the past that I did not give you the impression that pullbacks were a true âstrategyâ as they are more a tool. Stocks in an uptrend (higher highs, higher lows) will take âbreathersâ in that upward momentum. They are often just periods of profit taking by folks in that stock who decide to bank some or all of their gains. Like all generalized price movements, they are not guaranteed. They can be variable and even be the start of a reversal, so they are not signs you use totally on their own. If I am interested in a stock in an uptrend, I will often take a small position immediately at market and then place a limit order guessing around where the 21 ema may run in a pullback. But that is often a âplace holderâ for a trade for me in that as I watch the stock, I can in seconds convert that order to a market order or adjust the level.
I find pullbacks funny in a way as in stocks with a good uptrend, you are often better to just buy at market. I have followed stocks that decide not to do a pullback until much later and I would have been better off just buying during the heat of the trend. But human nature drives up to make the kill at the lowest point possible, sometimes shooting ourselves in the foot. I probably use them more in stocks that I have a lower commitment to and try to add a few percent chance of positive trade.
Pull backs are NOT specific to a certain EMA. I tend to use 21 as a general target, itâs a midrange fib number, but am not fixed on a single number and I also look at prior support levels. Folks use moving averages, support levels, pivot points, Fibonacci levels and phase of the moon to pick targets. But they are just targets. It also helps to go back a year or so on a chart and look to see if there is a trend in that stock to bounce at a certain level. Remember, these trends are other traders getting triggered by the same thing you are looking at. Also, as EMAs, they move relative to the price action, meaning that during the early initial part of the uptrend, especially if it is a reversal from a recent downtrend, they may be inverted with higher EMAs (34, 50, etc) above the lower EMAs. Makes it hard to pick one.
Below is a chart of XLK, not the greatest example, but gives you a better picture. The key is that it is in an uptrend. There are periods of profit taking and pullbacks. But note that the EMAs are initially inverted. The 50 ema becomes a bounce level at a couple pullbacks. The 21 is buried in the price action until later. I am in XLK for the moment, but didnât wait for pullbacks.
Hope that gives you more understanding. I just didnât want to leave you thinking that I go looking for pullbacks as a strategy. They do not exist in a vacuum and are not stand-alone tools.
Lakedog,
Thanks so much for the detailed explanation! I knew you werenât using it as a strategy by itself, but I thought there might be a specific MA you used when considering a pullback as one factor in the decision. Now I think I understand that it depends on the specific stock, how it has behaved in the past, and how it is behaving in recent days. The biggest thing I missed on CMG was that the uptrend ended on earnings day and a sideways pattern began. It is a little strange that it never went back down. Anyway, Iâm still obviously in the early learning stages. I get what you are saying about getting into an uptrend at market too because I have let some get away by holding out for a pullback that didnât really materialize. Thanks for all the info and the good example.
Technically MARA is in a squeeze, but has been for 25 periods. I donât use squeezes anymore, so not the best one to critique this, but I wouldnât be very interested. Will it move, sure at some point but there is little momentum behind it and itâs hard to even predict which direction it will turn. When I have used squeezes in the past, I preferred stocks taking a breather after a clear likely move. The anticipation is it will likely continue the momentum. The same as a pullback. MARA is loosing steam without any hint as to which way it will turn. Itâs in the Financial Services sector which is also flattening. I prefer to hunt active stocks with some energy, one way or the other.
Mara moves with Bitcoin and Ethereum since it is a Miner of Bitcoin. Bitcoin and Ethereum have been stuck in a range just like Bitcoin and Ethereum. Very hard to swing trade.
Lakedog,
Me either. When it broke above itâs range yesterday morning, I got in. Ran up sharply, then back down just as fast. When it got back into itâs old range, I thought it was a fluke and got out. Big mistake. But now at least I have this experience. Learning by trial and error.
I think the reason it broke out is because Fidelity is expected to make a big move in Crypto.
Also Blackstone is looking to create an ETF.
I am not sure the miners is the way to play this, although I could be wrong, but the higher Bitcoin goes the more money they will make I just think it will be choppy. I look at the miners like the drillers in Oil. In the Crypto market you have to also be aware that most coins are being declared equities by the SEC, the only two that I am aware of that are not are Bitcoin and Ethereum. I believe anything Fidelity does will be with those two, as Fidelity already has Bitcoin trading on their site. The ETF that Blackstone is creating is a Bitcoin ETF. Looking at that I have a position in GBTC to play that. Another way to play bitcoin is BITO.
There is always a small pang of âmissing outâ when a stock you eyeball and pass on jumps. However, I have no regrets in not considering MARA. I didnât know the stock or any core details and always try to have an inkling of what a stock is before I invest/trade. I also donât trust month long squeezes. John Carter who developed TTM Squeeze likes to say that itâs a stock gathering energy. For me, after a week or so, itâs more stale and dissipating energy and I donât trust them. For them to make any move, it always seems to take an outside influence, as Andy described. Plan your trade and trade your plan.
For the record, it is still technically in a daily squeeze. Bollinger bands are still within itâs Keltner channels. Although itâs 4 hour squeeze has completed. It sometimes helps to get some history on the stocks squeezes. If you look at the big chart from my first response, there are some data fields in the top. The average squeeze count is 6 and the average duration of post squeeze run is 4 periods. Just food for thought.
Thanks Andy and Lakedog! Fidelityâs interest does seem to explain it. Iâll take a look at that first chart in more depth. Thanks for pointing out the averages to me, and the bollinger bands. There are so many things I want to learn more about. It just all takes time.
