Happy Sunday, Traders!
I hope you all had a brilliant week and the past week brought you success not only in your trading but also in other areas of your life. As the new week quickly approaches, it’s time to focus up once again and get the swing trading plans locked in.
Last week was dominated by a sea of red and a continuation in selling across the board, with only a handful of names outperforming the market. As it relates to the S&P 500, the standout performer last week was Nvidia (NASDAQ: NVDA), up almost 6% on the week, while the QQQs closed the week down 2.21%, SPY down 2.05%, and the semiconductor ETF SMH negative 0.05%.
While my top two swing ideas from last week, CVX and UPST, did not trigger or materialize, both remain attractive, potentially needing more time to set up. Therefore, I will continue to have my alerts set in both stocks going forward, although I will no longer be watching them actively. As a new week approaches, my primary focus will shift to new swing setups, and after last week, there are a few.
However, as summer trading is still alive and well, I am seeking absolute confirmation before entering a new swing position. As I mentioned last week, With the current trading volumes, the correction experienced last week in the market, and where the big picture trend stands for the overall market, it’s all about playing it smart and steady. Less is more right now.
Three New Swing Ideas:
PulteGroup (NYSE: PHM)
PulteGroup, Inc. is a company involved in homebuilding, mortgage banking, and title and insurance brokerage. It operates in two segments: Homebuilding and Financial Services. The Homebuilding segment encompasses operations across numerous states, while the Financial Services segment focuses on mortgage banking and title operations.
Shares of PHM Broke Its Uptrend
Year-to-date, shares of PHM are up over 74%. However, a notable shift in momentum took place last week in the sector as many homebuilding stocks broke their uptrend. PHM broke below key short-term moving averages and its uptrend and closed the week down 4.19%. From a technical point of view, the break of the uptrend signals an important momentum shift to me, at least in the short term. Therefore I am looking for a secondary opportunity and potential leg lower.
My Trade Plan
As I mentioned above, due to the current environment and time of the year, related to swing trading, I am expressing extra patience and discipline and only looking to enter new swing positions if I get absolute confirmation.
*Please note that the prices and other statistics on this page are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity, slippage and commissions.
I am looking to enter PHM short on a lower high bounce, focusing predominantly on the hourly chart, between $80.5 and $81.50. I will be looking for the stock to stage a bounce over $80 and for sellers to step back in and provide the resistance I am looking for as an entry signal. Once the lower high has been confirmed on a higher time frame (hourly chart), I will get short with a stop above the high of the lower high.
My first target would be last week’s low, $77.78, where I would look to cover half of my position. If that target is reached, I will then trail my stop by 1 ATR and look to cover the rest of my position into the next level of support, $75. My timeframe for this trade to develop and play out is 1 to 1.5 weeks. If there is continued weakness immediately off the open, I will not look to chase the stock short. As I said, patience is vital in this environment, and therefore I will only enter this trade short if the plan materializes as outlined above.
Tesla (NASDAQ: TSLA)
Shares of TSLA have experienced immense selling pressure lately, down 11.19% last week and 18.03% on the month. With shares rapidly declining and yet to find price stability, I am in no rush to get long. However, in the short term, the stock is approaching oversold territory, in my opinion. With the stock firmly below declining short-term key moving averages, like the 5-day and 20-day, there are still no signs of a bottom, but as TSLA fastly approaches a key support level, a short-term bounce opportunity becomes likely, in my opinion.
My Trade Plan
$210 – $200 is a significant area of support for TSLA, and with the stock down double digits last week and on the month, I’m now looking for a sign to get long for a 2 – 3 day bounce trade.
*Please note that the prices and other statistics on this page are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity, slippage and commissions.
The key here is that I will only buy the stock after it bottoms and shows signs of support. I will wait for buyers to step in and provide the support I need to see to get long.
So, in terms of getting long, there are two scenarios that I am prepared for. Firstly, I will get long if the stock trades near the $210 area, reverse off the lows intraday, reclaims the VWAP, and goes green, marking a bottom. In that event, I will get long upon red to green confirmation, with a swing stop at the day’s low. If that triggers and the move plays out, I will cover my position towards the breakdown area of last week and 5-day SMA between $225 – $230.
The second scenario in which I would get long is if Tesla held above Friday’s high on Monday. If Tesla spends considerable time ( over an hour ), basing above Friday’s high while the overall market remains over its intraday VWAP, I will look to get long versus Friday’s low for a short-term bounce trade toward $225.
T2 Biosystems (NASDAQ: TTOO)
This is certainly a different type of stock versus the above two and not everyone’s cup of tea. TTOO is a small-cap biotech company that has gained enormous attention lately and has been dubbed a potential meme stock. The stock has a market capitalization of about $151 million and a float of about 283 million shares.
In the past two months, the stock surged about 375% higher after receiving an extension from Nasdaq, reporting financial results earlier this month, and increasing short interest and online attention.
This is a stock I traded intraday last week. However, now that volume has begun to die down, and the top appears to be set, I would be interested in shorting a lower high on the hourly time frame.
My Trade Plan:
After the stock topped out last week in the pre-market at $0.73 and faded to a near $0.40, I am looking to get short a lower high bounce, using the hourly time frame. Ideally, the stock pops back near $0.60 and fails, which would be my entry to get short.
*Please note that the prices and other statistics on this page are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity, slippage and commissions.
If the stock confirms a lower high near $0.60, I will get short with an initial stop loss placed at $0.05 (half an ATR) above the high of the lower high. However, as the trade works, I will lower my stop to the high of the lower high.
My first target for the trade is $0.40, a critical level of support for the stock. I will look to cover up to 75% of my position into this level, aiming to cover the remainder of my position into $0.30.
Importantly, I will enter this position once a lower high confirms. I will not get short if the stock reclaims higher prices and bases over $0.60. Small caps have a higher risk, so I will only get short if my trade plan materializes, and of course, I will have a hard stop in place. If I enter this position, I plan on imposing a 3-day time stop on it.