swing trading new stocks

Discussion in 'Trading' started by Trend Fader, Oct 25, 2007.

  1. Anyone ever think about swing trading stocks that are less than 1 year old? Seems to be a lot of nice trends and big winners .. Any thoughts?
  2. I trade anything after 127 trading days on the market - assuming Price sits between $10.00 and $50.00 USD. Of course, the stock has to meet other criteria as well (High EPS and RS Rank, etc.), but I constantly see these newer companies enter my list of Equities to trade. Some fall by the wayside, while others, (HANS for example) stick around for some very nice profits.

    - Spydertrader
  3. I have just been noticing that the long breakouts from classical chart patterns seemed to have above avg momentum for stocks that are new to the market.
  4. This question is puzzling me for years. I do not think about it much because it may not have an answer.

    Part of the puzzle is the definition of trend. I argue that there is no trend, there are only mathematical properties such as most recent daily closing price > value of the 300 day exponential moving average (EMA) value. It is a yes or no question. So if the stock is trading for even a few weeks as long as the price is greater than the 300 day EMA value then buy it. I manage risk using an appropriate position sizing method.

    Newer companies have the property of being publically little known and therefore not widely owned. By definition, traders are only just discovering newer companies and newer stocks. Lots of buying may enter the market for a newer stock as the years pass and big buying can cause price values to increase many fold. Insiders - perhaps the founders of the business - may hold a large percentage of the outstanding shares. Investment bankers may own another large fraction of outstanding shares. Both insiders and investment bankers may have an interest in promoting the company and manipulating the stock price to greater values so that they can sell at greater price values. Speculators may assist in manipulating stock price to greater values. If a stock shows a history of increasing prices then traders may buy low and sell high, or perhaps buy high and hope to sell higher. In both cases the result is the same. For a while insiders, investment bankers, and speculators are united in their efforts to manipulate prices to greater values. We communicate with each other in a very basic way using the stock price graph. We all view the same graph, use similar indicators, and may have similar interpretations of the chart pattern.

    The day comes when the price can not be manipulated higher. The alert traders are likely looking for this sign, the naive investors may trade on rumors, are likely indecisive, or may buy low and sell high. Buying low and selling high is OK at the beginning of a bull market but at the end of the upward trend buy low sell high, well there isn't any high the price values just decrease as in the case of Countrywide Financial stock symbol CFC. The price might be decreasing because the insiders are selling large quantities of stock for whatever price they can get because they know more about the company than anybody else and the condition of the company is not good.

    I find the easiest way to handle all this information is to buy what goes up and sell when price values are less than say, the 300 day EMA, or the lowest price in 9 months, or the price value is less than the price value 350 sessions earlier, or whatever my research might identify as a general trading parameter for trade exit.