All the scans presented here are End-of-Day. These scans are best executed &analyzed before the opening of the market! So you have all the time in the world tobe prepared to swing these stocks like a PRO.Let’s start with our first scan: this is the first scan we execute every single tradingday.
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Swingsthe stock must be experiencing a minor decline/pullbackwithin the context of a uptrendorthe stock must be experiencing a minor rally as part of a downtrendWe use this scan to search for stock that
FORCESWING
Title:
has been in an uptrend but experiencinga minor decline/pullback.
LONG
With this scan we try to detect stocks forpotential long swing trades.we stay away from stocks that trade less than500,000 shares of the 20-day Volume
Code: MAV20 >=500000 AND
Average to ensure liquidity (sometimes weuse 250,000 instead, depending on marketconditions)to be sure we do not trade cheap stocks
CLOSE>12 AND
(sometimes we use 7$ instead, depending onmarket conditions)
CLOSE > SMAC10 and CLOSE >SMAC20 ANDHIGH < HIGH1 and HIGH1 <HIGH2 AND
to be sure the stock is still in an uptrend
the stock must be experiencing a 3 daydecline/pullback within the context of auptrend
FORCE3<=0 AND FORCE13>=0AND
the short term battle is now won by thebears, but still the bulls are in control of thelonger-term battle
ADX20>30
to be sure the stock is still trending
(s): swings
long
Only trade what you like !
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We use this scan to search for stock that
FORCESWING
Title:
has been in an downtrend but hasexperiencing a minor rally.
SHORT
With this scan we try to detect stocks forpotential short swing trades.we stay away from stocks that trade less than500,000 shares of the 20-day Volume
Code: MAV20 >=500000 AND
Average to ensure liquidity (sometimes weuse 250,000 instead, depending on marketconditions)to be sure we do not trade cheap stocks
CLOSE>12 AND
(sometimes we use 7$ instead, depending onmarket conditions)
CLOSE < SMAC10 and CLOSE <SMAC20 AND
to be sure the stock is still in an downtrend
LOW > LOW1 and LOW1 > LOW2
the stock must be experiencing a 3 day
AND
RALLY within the context of a DOWNtrend
FORCE3<=0 AND FORCE13>=0
the short term battle is now won by the
AND
bulls, but still the bears are in control of thelonger-term battle
ADX20>30
to be sure the stock is still trending
Type(s): swings
short
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10.1.2 Cut and PasteHere is how to cut and paste SwingLab scans into SwingTracker. To build your own,just type a formula into Step 4.1. Open SwingTracker (runs on Windows & Mac OS)2. Click on the SCAN button
3. Then Click on the Query button & Add Criteria
4. Paste (CTRL-V) the code into query & press OK
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5. Run & Save the Template
6. Once Saved, will it always be part of your swinging templates!
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7. Press Search and analyze/enjoy the results!8. Only trade what you like!!!
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11 Case Studies
Trade: DFXIDate: 04/26/2002Reasons for trade/setup: CLOSE > SMAC50 and CLOSE > SMAC20 (to be sure the stock is still in an uptrend) and HIGH< HIGH1 and HIGH1 < HIGH2 AND (the stock must be experiencing a 3 day decline/pullback within the context of auptrend) and FORCE3<=0 AND FORCE13>=0 (the short term battle is now won by the bears, but still the bulls are incontrol of the longer-term battle)Swing Entry price: $42.48 (High of yesterday $42.42 + $0.06)Stop Loss price: $41.35 (order $0.06 below the low of the previous day $41.41 - $0.06)Target: $45.45 (entry price +7%)Exit: $45.45 (05/02/2002) & $43.44 (05/02/2002)Reason for exit: $45.45 at a 7% gain on the long swing trade & $43.44 trailing stop low of yesterday $43.50 - $0.06Profit/loss: $1.965 = ($2.97 + $0.96)/2 or gain of 4.63%
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Trade: PFGDate: 04/12/2002Reasons for trade/setup: CLOSE > SMAC50 and CLOSE > SMAC20 (to be sure the stock is still in an uptrend) and HIGH< HIGH1 and HIGH1 < HIGH2 AND (the stock must be experiencing a 3 day decline/pullback within the context of auptrend) and FORCE3<=0 AND FORCE13>=0 (the short term battle is now won by the bears, but still the bulls are incontrol of the longer-term battle)Swing Entry price: $27.26 (High of yesterday $27.20 + $0.06)Stop Loss price: $26.35 (order $0.06 below the low of the previous day $26.41 - $0.06)Target: $29.17 (entry price +7%)Exit: $27.94 (04/18/2002)Reason for exit: $27.94 trailing stop low of yesterday $28.00 - $0.06 & Target of 7% never metProfit/loss: $0.68 or gain of 2.49%
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Trade: PTENDate: 03/26/2002Reasons for trade/setup: CLOSE > SMAC50 and CLOSE > SMAC20 (to be sure the stock is still in an uptrend) and HIGH< HIGH1 and HIGH1 < HIGH2 AND (the stock must be experiencing a 3 day decline/pullback within the context of auptrend) and FORCE3<=0 AND FORCE13>=0 (the short term battle is now won by the bears, but still the bulls are incontrol of the longer-term battle)Swing Entry price: $26.84 (High of yesterday $26.78 + $0.06)Stop Loss price: $25.94 (order $0.06 below the low of the previous day $26.00 - $0.06)Target: $28.72 (entry price +7%)Exit: $28.72 (03/28/2002) & $29.99 (04/03/2002) at openReason for exit: $28.72 at a 7% gain on the long swing trade & $29.99 trailing stop low of yesterday $30.31 - $0.06Profit/loss: $2.515 = ($1.88 + $3.15)/2 or gain of 9.37%
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12 Appendix A–Short SellingTraditionally the premise of investing is that you buy an asset and hold it until it risesenough to make a sizable profit, it doesn't get much easier than that. What aboutthe times you come across a stock that you wouldn't invest a cent in, you know thatthing is doomed, a sure loser. If you knew that the stock was going to declinewouldn't be nice to be able to profit from its decline.Well you can profit from the decline of a stock and although it sounds easy, there aresubstantial risks and pitfalls that you need to watch out for. The mechanics of a shortsale are somewhat complicated and the investor's risks are high so it is importantthat you understand the transaction before getting into it. Let’s dive in!
12.1.1 What does it mean to sell short?If you sell a stock you don't own, you are selling short. (Yes, it's legal.) You are nowshort the stock.A short seller sells a stock that he believes will fall in value. A short seller does notown the stock before he sells it. Instead, he borrows it from someone who alreadyowns it. Later, the short seller buys back the stock he shorted and returns the stockto close out the loan. If the stock has fallen in price since he sold short, he can buythe stock back for less than he received for selling it. The difference is his profit.Short selling allows investors to profit from falling stock prices. "Buy low, sell high" isthe goal of both short selling and purchasing shares ("going long"). A short salereverses the order of a typical stock purchase: the stock is sold first and boughtlater.For example, in September 1987, Bob thinks IBM is overvalued. She sells short 100shares of IBM at $175 per share. The stock market crashes in October and IBM'sshares fall to $125 per share. Bob buys back 100 shares of IBM and closes out theshort sale. Bob gains the difference between the sales proceeds and the purchasecosts and pockets $5,000 from the short sale, excluding transaction costs.
12.1.2 Where Does The Broker Get The Stock?The short answer is from other customers. Oddly enough, he doesn't have to askpermission!
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Short selling is a marginable (???) transaction. In plain English, that means you mustopen a margin account to sell short. This is the same account you would use if youwant to use your stocks as collateral to borrow money from your broker.When you open a margin account, you must sign a hypothecation / rehypothecationagreement. This hypothecation agreement says you will pledge your stocks ascollateral against your loan. The re-hypothecation agreement allows your broker toloan your stocks to a bank, or to other customers!
12.1.3 How Do I Sell Short?Unlike a stock purchase transaction, which involves two parties (the buyer and theseller), short selling involves three parties: the original owner, the short seller, andthe new buyer. The short seller borrows shares from the original owner, andimmediately sells them on the open market to any willing buyer. To finalize ("closeout") the short sale transaction, the short seller must then go out into the stockmarket and buy the same amount of shares as he sold so that the broker can returnthem to the original owner.To sell short you first must set up a margin account with your broker. A marginaccount allows you borrow from your brokerage company using the value of yourportfolio as collateral. The general rule is that the value of your portfolio must equalat least 50% of the size of the short sale transaction. In other words, If you have$1,000 worth of stock in your margin account, you can borrow $2,000 of stock to sellshort.To sell a stock short, you must borrow stock. To initiate a short sale, you simply callup your broker and ask to sell short a specific number of shares of your selectedstock. Your broker then checks with the Margin Department to see whether theshares are available or can be borrowed from another brokerage, usually while youwait on the phone for a minute. If they are available, the brokerage borrows theshares, sells them in the open market, and puts the proceeds into your marginaccount. To close out your short sale, you tell your broker that you want to buy thesame number of shares that you shorted. The broker will purchase the shares foryou using the money in your margin account, return the shares and close out theshort sale transaction.While your short sale is outstanding, your account will be charged interest againstthe value of the short position. If the stock you shorted goes up in price, or the valuePage 70
of the stock you are using as collateral goes down in price, so that your collateral isless than the "maintenance" requirement (usually 30% of the value of the shortposition) you will be required to add money to your margin account or buy back thestock that you sold short. You must also pay any dividends issued by the companywhose stock you sold short.
12.1.4 Up Tick RuleTo sell your stock short, you must adhere to the up-tick rule. The transaction beforeyour short sale must have been executed at a higher price than the transactionbefore it. In other words, the transaction before your short sale must be an up-tick.In practice, you cannot short a stock that is already falling in price. Otherwise, shortselling would amplify the decline.
12.1.5 Why Sell Short?The two primary reasons for selling short are opportunism and portfolio protection.Occasionally investors see a stock that they believe has been hyped to a ridiculouslyhigh level. They believe that the stock price will fall when reality replaces the hype. Ashort sale provides the opportunity to profit from the overpriced stock. Short salesare also used to protect an investor's portfolio against a market downturn. Byshorting stocks that the investor believes will fall sharply when the market as awhole falls, investors can help insulate the value of their portfolios against suddenmarket drops.Zitel provides an example of opportunistic short selling. In 1996, Zitel was caught upin a wave of investor enthusiasm because it has a stake in a company that fixes thecomputer glitch that causes computers to interpret dates in the next century (2000s)as dates in this century (1900s). This problem, known as the "Year 2000" problem,suddenly became a hot topic of conversation and made it to the covers of Time andNewsweek. In September 1996, Zitel was selling for $7 per share. By December, theshares topped $70. At this point, many investors thought the stock was overpricedand saw an opportunity to make money by selling it short. If an investor had soldshort in December 1996, he could have bought the stock back for $15 per share inApril 1997. Selling short would have allowed the investor to take very profitableadvantage of the opportunity presented by the overpriced Zitel stock.
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Short selling is also used to protect portfolios against erosion due to a broad marketdecline. Short sellers make money when stock prices fall. An investor can diversify along portfolio by adding some short positions. The portfolio will then have positionsthat make money both when prices rise and when they fall. This reduces thevolatility in the portfolio's returns and helps protect the value of the portfolio whenprices are falling.By shorting carefully selected stocks that are priced near their peak but that will fallsharply if the market falls, an investor can use the profits from the short sales tohelp offset losses in his long position to protect the value of his portfolio.For example, Bob has most of his wealth tied up in stocks which she has boughtbecause she expects them to appreciate in price. But she is concerned that the stockmarket is vulnerable to a sharp drop and wants to protect his savings while stayinginvested in the market. She knows that market drops are often caused by a changeof investor sentiment from optimism to pessimism. She identifies businesses that arenot worth much today, but whose stock price is high because people hold high hopesfor their future prospects. These stocks should be especially susceptible to a negativeshift in sentiment since optimism is what principally drives their stock price. She thensells these stocks short. If investors become more pessimistic and the market fallsthese stocks should fall more than most. Larry can use the profits from these shortsales to offset losses in the rest of his portfolio. This will help to protect the value ofhis portfolio.
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13 Appendix B– RessourcesI highly recommend the following Books on (swing) trading written by expert tradersor excellent pedagogues. I hope you will enjoy them as much as I do.
A no-nonsense, straight-shooting guide from friend/founder of Pristine.com,designed for active, self-directed traders. Provides potent trading strategies,technical skills, intuitive insights on discipline, psychology and winning methods forcapturing more winning trades, more often.great book, one of my favorites… bravo Oliver great job…
Top notch book integrates three major areas of trading; psychology, trading tacticsand money management into a coherent framework for success. Unique approachcombines the author's trading success with his decades of experience as physicianand psychiatrist.
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Tells you how to identify mispriced options and construct volatility and "deltaneutral" spreads used by the pros. Using a non-technical trading approach, he leadsthe reader into the real world of option trading and applies his well developed pricingand volatility theories into practical, tradable strategies. Here are advancedtechniques for the serious trader.For a regularly updated list of my preferred reading, visit:http://www.mrswing.com/en/prefered_book.html
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Tradelike a
PRO
with MrSwingLarry Swing
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