Trading Plan – Bullish Stock – Buying Weakness

Trading Plan – Bullish Stock – Buying Weakness

TSN Tyson Food Inc Stock Chart 5.22.19

TSN Tyson Food Inc Stock Chart 5.22.19

The trading plan, the dreaded document everyone tells you to write. Don't trade until you have it on paper.

For the most part that is true, what's not true is that it needs to be complicated. At it's core, a trading plan is your road map for finding and executing trades. Common wisdom is that the more detailed, the better your chances of success.

That wisdom of course assumes you follow the plan. Most traders make their strategy too simple, or too confusing. In both of these scenarios the traders fails to trade with confidence. They don't actually have a trading plan, they have a list of rules tangled with indicators.

Today's swing trade setup ion TSN illustrates the level of detail you need to set up a high percentage trade. What makes this trade unique is that we are looking to buy a stock that closed on it's lows.

Buying weakness in a strong stock is a solid play, You are looking for the short-term profit-taking to exhaust itself, and the long-term trend to resume. The beauty of this setup is that price action (the recent decline) has EXPANDED the profit potential. The distance between the previous high and the current pull back.

One of the problems we face in the current market is that a contraction in prices, and “melted candlesticks” (small body) leave us very little room to earn money. Gaps and small body candlesticks make accepting risk a poor decision, because we can't justify the risk. (Because trade expectation is low)

So today's setup solves that problem and offers opportunity to earn a profit on a new swing trade.

The mini trading plan for this setup is:

  • Looking for a LOWER opening, AND a push lower off the open price.
  • Looking for the selling to subside @ $79.25.
  • Then game plan an entry on a short-term reversal pattern. (If a trader can't enter on a intra day chart that's fine, an entry to buy on a MOC order, or using a buy stop above the current market is possible)
  • Since the previous momentum swing higher was eight dollars, I am game planning a similar bullish move. So my profit target would be a little less than $8 higher than my entry.
  • Stop loss would be below today's low.
  • Initial entry would only be fore 50% of the total shares I plan to build.

The key take away from this is the expanded profit potential, Buying bullish momentum in bullish order flow is a great strategy, but at some point the odds of following through, become lower. Which decreases the profit potential for the risk you must accept.

Buying weakness solves this problem in a tight tape.

One last thing, My entry price after the push lower was determined by the average true range on the daily chart (for TSN in this case is $1.52.) So I expect the price to decline slightly less than the ATR to look for my entry.

One last, last thing 🙂 We are looking for a lower open, and a push lower, if that does not happen we let the trade go. This part of the setup is very important.

Pete

Apple Earnings Could Be Cut 29% on China Ban, Says Goldman

(Bloomberg) — Apple Inc.’s earnings would take a 29% hit if China were to retaliate against the U.S. with a ban on sales of the iPhone maker’s products, Goldman Sachs estimated.

While Goldman takes no view on the likelihood of a potential ban, such a restriction would represent 100% of estimated Apple earnings exposure to both mainland China and Hong Kong, assuming some offsetting impact from cost savings in sales and marketing, analysts including Rod Hall wrote in a note.

bloomberg.com/apple-earnings-china-ban

Lowe’s tumbles on lower outlook, mixed earnings

Lowe’s shares plummeted 9% before the bell Wednesday after the company posted mixed fiscal first-quarter results and cut its forecast for the fiscal year.

cnbc.com/lowes-shares-down-after-earnings

Target quarterly same-store sales top estimates, shares jump 8%

(Reuters) – Target Corp’s same-store sales for the first quarter beat Wall Street estimates on Wednesday, benefiting from higher online sales and an increase in shoppers at its stores, sending its shares up more than 8% in early trading.

reuters.com/target-jumps-8-precent

Pete Renzulli
 

Click Here to Leave a Comment Below 2 comments
Myron Whitmarsh - October 4, 2020

Very nice info and straight to the point. I don’t know if this is actually the best place to ask but do you guys have any thoughts on where to get some professional writers? Thanks 🙂

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