Swing Trading and Market Timing Knowledgebase

By: John Crane, swing trading guru

Reaction Swing Microsoft Corp.

Figure # 6.6 - The beginning of the bearish Reaction swing was August 19—marked as (C)—with the pivot low price at 26.70. After MSFT posted a high on August 31, the stock turned lower, but did not break the pivot support at (C) until September 8 when the stock market closed at 26.61…9 cents below the pivot low.

Day one – September 8 – Breakout bar – The stock traded through the pivot low support and closed lower.
Day two – September 9 – The stock market finished as an inside day with a close slightly below the previous day’s close.
Day three – September 12 – Another inside day and the stock market closed at 26.61…9 cents below the pivot low.

The next day MSFT dropped out of the small pennant formation that had developed between day one and day three and continued the downward trend for another two weeks.

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Figure # 6.6 – Microsoft Corporation (MSFT)

Figure # 6.7 - A second Reaction swing formed after the stock market bottomed at (B). The high of the swing pattern was on October 19 (C) followed by the subsequent low on October 21 (D). The pivot high was 25.13.

Day one – October 26 – Breakout Bar – After testing the pivot high during the previous two trading sessions, MSFT broke the resistance and traded to a high of 25.33, but pulled back to close at 25.11.
Day two – October 27 – The stock market pulled back and closed below the previous day’s low, but remained above the protective stop at 24.55.
Day three – October 28 – The stock began trading at 25.10 and pushed above the previous high where it closed at 25.70…well above the breakout point. The stock market continued higher into the projected reversal day without any substantial corrections.

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Figure # 6.7 – Microsoft Corporation (MSFT)

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**THE RISK OF LOSS IN TRADING CAN BE SUBSTANTIAL. YOU SHOULD, THEREFORE, CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER OR OVER-COMPENSATED FOR THE IMPACT IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT.NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES.