Those who are looking for swing trading opportunities should consider taking a look at stocks that have increased the most over the past year. Swing traders should focus on stocks that trade more than 500,000 shares per day, or even a million, scanning through the results and noting stocks that are in strong uptrends but that have recently started to pull back. Stocks with significant upward price momentum warrant trade consideration because they provide a trend direction to trade in and strong movement to capitalize on. Here are two strong stocks and the levels at which to consider looking for an entry.
Shopify Inc. (SHOP) stock was trading below $44 at end of the 2016. In 2017, it has climbed as high as $123.94. In late August, the price broke above a resistance area, and when that occurs, the price often comes back to test the breakout area. In this case, that ares is between $104 and $100. This does not mean that the stock will pull back to this region before moving higher, but it is a pattern that occurs quite frequently. (See also: Shopify Stock Continues Breaking Out to New Highs.)
Therefore, if looking to get long, one way to get in is to wait for the price to drop into the $104 region. Once that occurs, traders should enter only when the price starts moving up again. This could be marked by a bullish engulfing pattern or an upside breakout from a consolidation that forms in the area. A stop-loss order could be placed below the swing low that formed just prior to entry (yet to be determined). Since the trend is up, and uptrends are expected to make new highs, a target is placed above $124.
Universal Display Corporation (OLED) shares traded near $60 at the start of the year and hit a high of $145.30. September saw the price pull back and consolidate between $130.65 and $124.55. The consolidation occurred near a prior resistance area that the stock broke through in early September. Market players should consider a long trade if the price breaks above the consolidation high of $130.65. A stop-loss can then be placed below $124 with a target above $145.30. (For more, see: Time to Sell Universal Display After 121% 12-Month Gain?)
One danger here is that the pullback off the high was very steep, and often there is residual selling pressure after such a steep decline. The stock provided an example of this in June, when it had a fast drop, a consolidation and then another drop. If stopped out on the initial trade (above), another entry occurs if the price drops but then consolidates right away in the $120 region. Traders could consider buying on that consolidation breakout, if it develops, with a stop-loss below the consolidation low and a target near $145 or above.
The Bottom Line
For Shopify, one potential trade is to watch for a pullback to the prior resistance area of $104. If the price starts bouncing off that level, traders could look to get in, assuming that the expected reward justifies the risk at the time of the trade. In Universal Display, there are a couple of options. Traders could consider buying on an upside consolidation breakout, or if the price drops, they could look to buy on the next upside consolidation breakout, assuming the consolidation occurs near $120. It is advisable to utilize a stop-loss order to control the downside and risk only a small portion of account capital on any single trade. (For additional reading, check out: The Daily Routine of a Swing Trader.)
Charts courtesy of StockCharts.com. Disclosure: The author did not have positions in the aforementioned stocks at the time of publication.