Swing Trading and Market Timing Knowledgebase

By: John Crane, swing trading guru

Swing Trading Microsoft

After MSFT posted the low close October 12, (B), the stock market began to trade higher over the next five days and closed above the 20-day SMA, (C). At this time the stock market pulled back and closed lower on two consecutive days, forming the beginning of a potential bullish Market timing Reaction swing at (D). Three days later—10 days after the October 12 low—the Market timing Reaction swing was confirmed and MSFT was off and running. The stock market never traded below the October 12 low, therefore, new swing pattern sell signal was never confirmed.

The same scenario unfolded after MSFT reached the November 16, (E), swing trade date signaled and ended the three-week rally. Three days after the predicted swing trade date, MSFT hit a new high and closed at 28.16 where it turned lower. Five days into the correction the stock market bounced off a low at (F) and closed higher for three consecutive days and ended with a pivot high on December 2, (G). A new swing pattern had formed inside the counter-trend move and suggested a longer-term A-B-C correction.

MSFT dropped through the 20-day SMA and continued the downward slide. The correction lasted 27 days and retraced close to 60% of the price move between October 12 and November 21.

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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.