While Wednesday and Thursday gave us clear bottoming action across the board in stocks, with tons of strength being shown on both days and appearing like the market was ready to run to new highs --- we got some fresh Trade War Drama overnight Thursday that reminded us that you cannot get too comfortable in this market. In the past decade we have seen many news-driven markets but this is the first one I have seen where the market has been so sensitive to any slightest form of news - like a tweet suggesting absolutely nothing. The reality of the situation is that this will not be resolving anytime soon so get used to it and make the necessary adjustments. For me, I have been taking more profit in my winners at 2:1 and 3:1 risk/reward during the day, and having lesser expectations out of each trade. I know the likelihood of hitting a 10:1 trade is much smaller right now as equities have become so sensitive to headlines in this environment, so I am going to adjust.
Swing trading becomes much more difficult when the market has little memory of the prior day's action because everyone is so focused on the latest tweet or latest headline and how it should shape things for months to come, when all we have seen is an ever changing cycle. You cannot over extend yourself with risk as its a lower probability environment.
We found a lot of success in the software names the past couple weeks as they don't share the same headline risk with most names depending on China. We have been seeing a ton of great action in the recent IPO's, so we'll need to keep an eye on those fast movers. The best looking stocks as a whole are the utility stocks, which is never what you want to see from a risk-on swing trading point of view (as those are seen as flight-to-safety stocks).
Other than that we need to keep the pace of finding the most relatively strong stock and trading them accordingly.
This SWI was trade of the week two weeks ago and what has it done since then? Consolidate tighter and tighter, making it an even better setup now. Coming off a tight inside week, this setup must come to a combustion soon enough and with Friday's slight uptick in volume, I'm thinking it's finally ready. If I see heavy volume through first resistance 19.50 I will look to buy aggressively with an 75 cent stop below Friday's low 18.75. If the break happens later in the week I'll probably keep my stop slightly wider to macro support 18.50.