If you are a cash swing trader looking for how to find momentum stocks at the right time and when to exit timely, then this🧵is for you. (1/20)
Aso, I share regular updates and learnings on my channel. Join 👇telegram.me
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In the previous thread, I have already discussed how to filter stocks, create a watchlist and identify the current hot sectors/stocks. In this thread, we are going to discuss when we should go aggressive and when to sit on the sidelines. Check later
x.com
(2/20)
x.com
(2/20)
Right time to enter and take maximum advantage -
When most small and mid-cap stocks are up, indicating that the overall market breadth is strong, making it the most favorable conditions for swing trading.
What is market breadth and how can we check it?
(3/20)
When most small and mid-cap stocks are up, indicating that the overall market breadth is strong, making it the most favorable conditions for swing trading.
What is market breadth and how can we check it?
(3/20)
Market breadth analyzes the number of companies that are advancing relative to the number of companies that are declining. Therefore, a positive market breadth indicates that more stocks are up compared to down. The higher the number, the better it is. (4/20)
1. Firstly, you can check this using a heat map or indicator, or simply by using a screener with EMAs. If the stocks are below the 20 EMA and 50 EMA and are struggling for breakouts with many fake breakouts, it's a sign to sit on the sidelines. (5/20)
On the other hand, if the majority of stocks are above the 20 EMA and 9 EMA, then it's positive and you can start looking for stocks again. Overall market conditions play a significant role in making money, as your setups work much better during such times. (6/20)
2. Another way to check is to start tracking the small-cap and mid-cap index. I don't understand why people don't give importance to index charts. These are the best way to understand the overall environment. Once I started tracking these, it made my life easier and happier. (7/
How to check the index and what patterns we should look for:
Use simple price action methods. Check only weekly charts on weekends, otherwise only daily timeframe charts. Look for any pattern, not just textbook patterns like cup and handle or head and shoulders. (8/20)
Use simple price action methods. Check only weekly charts on weekends, otherwise only daily timeframe charts. Look for any pattern, not just textbook patterns like cup and handle or head and shoulders. (8/20)
Instead, look for patterns like range breakouts, rectangle breakouts and parallel channels. ATH breakouts, resistance breakouts or reversals from major supports like weekly supports, or reversals after a significant drop of 50-60% from the previous rally - (9/20)
Study the past charts and analyze the overall movement. What patterns do you find more significant? Check the charts for more understanding -(10/20)
The movement of smallcap and midcap indices is very different from that of Nifty and BanNifty as they tend to move rapidly in both directions. They easily give breakouts and do not struggle after a 2-3% move, especially in the type of bull market we have witnessed since 2020.(11/
There is a difference between breakouts. Please read carefully.
If a pattern breakout or resistance breakout occurs after a significant amount of time from that particular level, or after a good correction and it then gives a breakout, it will likely result in a strong move. (12
If a pattern breakout or resistance breakout occurs after a significant amount of time from that particular level, or after a good correction and it then gives a breakout, it will likely result in a strong move. (12
This up move is likely to continue without stopping easily, so it's important not to miss opportunities in stocks during such times. The same breakout principle applies to stocks as well.
However, if the index or stock has already been in an uptrend for an extended period. (13/
However, if the index or stock has already been in an uptrend for an extended period. (13/
And consistently providing breakouts, the resulting move may not be as significant as before. Nevertheless, you can still utilize it for a small swing trade. For eg., stocks that give multi-year breakouts in a bull market and under favorable conditions.. (14/20)
..are likely to continue their upward trend without easily slowing down. Such stocks have the potential to make a move of 50-60% quite effortlessly. Additionally, if the stock belongs to the current hot sector, it is crucial not to miss out on the opportunity. (15/20)
Currently, shipping stocks and defense stocks are considered hot sectors. So, whenever the index gives a buying signal, it is essential to first examine stocks within these sectors. In addition to defense, capital goods are also performing well. Please refer to the charts 👇(16/
For the exit strategy, you can also use the Index as a guide. If the index falls by more than 2% in a single day, it is advisable to start trailing your swing stocks strictly. But, do not exit before the trailing SL, as sometimes the market may experience a temporary fall. (17/20
If the SL is hit, exit your trades and be prepared to re-enter during the next opportunity. You can employ various indicators for trailing SL, such as EMAs, the Supertrend (10,1) indicator, swing lows, or any others that you have backtested and find convenient to use. (18/20)
If you are experiencing significant profits in most of your stocks, you can consider trailing them with a M2M stop-loss as well. If your profits decrease to 80%, you can book them and await the next opportunity. Essentially, when the market breadth begins to weaken.. (19/20)
..it is wise to start securing profits in your swing stocks. We will delve into a specific pattern that tends to perform well in stocks in the upcoming discussion. Stay tuned and follow @RijhwaniSheetal for more insights. Like and Repost if you found this helpful. (20/20)
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