Swing Trading Ideas

02/12/2015 7:00 am EST

Focus: STOCKS

Frank Zorrilla

Founder and Chief Investment Officer, Zor Capital

Frank Zorrilla, of ZorTrades.com, takes a technical look at the 19 stocks that are currently on his watch list and outlines the critical steps of his swing trading strategy that traders should also remember to adhere to on a daily basis.

These are the stocks on my watch list Wednesday; (AMBA), (AUY), (CLUB), (CZZ), (ERY), (EW), (EXK), (HABT), (HIS), (KANG), (KNDI), (LOCO), (NUGT), (PDCE), (PE), (QIHU), (SINA), (SLW), (ZSPH).  These are actionable 0-10 days long trading ideas if and only if they go through Tuesday’s high.

The Process:

Every morning I go through a few of my scans to find buy candidates for the day.  Depending on the current state of the market, the size of the list will vary, usually its no more than 50 names. My process is based on market structure not on beliefs or myths of what works or what doesn’t work. They are certain behavioral patterns that have been around for 100 years that are based on market structure; these behavioral patterns are recognizable, observable, and quantifiable. On daily basis, we have 3,000 stocks that we filter based on certain market structures that gives us an edge of a higher probability than a random outcome.  Once the list is narrowed to a handful of names, the market will further narrow down the list by getting us in or keeping us out of these names with a range expansion move.

I don’t look at charts in your conventional cookie-cutter manner or have rules as to where the stock should be whether its 15% off its 52-week highs or above or below certain moving averages, etc. In the short-term, none of that matters.

How much you put at risk per trade depends, for the most part, on what your current outlook is for the market over the next 0-5 days.

Put these names on your trading platform, set the alerts at Tuesday’s high for each name, once the alert goes off take a look at the chart, decide within 3 seconds whether or not you are going to buy it, decide how much you want to risk on the trade and your stop loss, hit the buy button and leave the rest up to the market, wash, rinse, repeat.  Buy ‘em tight, Sell ‘em loose.

A few things that you should know about this swing strategy;

  • Its main goal is to get you in when stocks are moving and keep you out in choppy/sloppy markets, it is imperative that you allowed the market to get you in only when the stocks go through their previous day’s high.
  • Your awareness of how the market is behaving is crucial, this will give you an idea of how hard to push the envelope.  My best indicator for this is my rolling 5-day watch list.
  • Swing trading is a numbers game, you are going to be wrong half the time, risk management is above all, and many times, you will have nothing to do because the market did not get you in. We are not looking for any action, we are looking for the right action.
  • Don’t be penny wise, don’t try to anticipate a move just because the chart looks good.  You can have a great looking tight setup with a stock coiling for ten days but who is to say that it won’t coil for another five days.  If you anticipate the range expansion, you might buy something that is not ready to go and it will only frustrate you and lower your odds of a winning trade.
  • For me, this list is a one way list: long bias. I do not look at this list as a long or short list, long and short are two different games with different dynamics.
  • You need to be extremely organized.  Most—if not all—your work will be done pre-market and you will spend the day just executing (or you can just automate it with buy orders after 9:45AM).

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By Frank Zorrilla of ZorTrades.com

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