The Best Stocks for Swing Trading

Introduction

As you probably figured out by now, swing trading comprises technical analysis, market awareness, and – last but not least – an abundant dose of good old intuition.

Finding the best stock to swing trade at the right time is not just the first step; it could literally make the difference between making a profitable trade and receiving a margin call.

So, how do successful traders find the right stocks for swing trading amongst thousands? Isn’t that the infamous needle in the haystack?

Well, answering that first question is exactly what this article is all about.

Ready? Let’s get right in!

First things first: the MARKET

Before jumping into the more specific points, it is important to consider the overall market conditions at the time of trading. The best stocks for swing trading can vary significantly depending on whether the market is bullish, bearish, or in a sideways trend. Your ability to adapt your swing trading strategy to the current market environment and to choose stocks accordingly could be the key to your success.

VOLATILITY is king

The love/hate relationship that every trader has with volatility oscillates from one side to the other according to our last trade success -or lack of it. But, let’s be honest with ourselves, if it wasn’t for volatility, none of us could be making any money from trading the markets.

Look for stocks that are known for being volatile and frequently experience significant percentage changes. Tech and biotechnology companies, for example, can be prime candidates due to their inherent sensitivity to news and hype.

Use a good stock screener to identify stocks with a high ATR (average true range).

Google (GOOGL)’s ATR overlapping its price action

As we found out in a past article, the ATR reflects the average movement of a stock during a specific timeframe, and higher values hint at more significant price swings. You can also set filters for percentage gainers or losers to spot stocks that made substantial moves in recent days.

Turn the VOLUME up!

High volume generally means high liquidity and liquidity is paramount in swing trading.

Higher trading volumes often also lead to tighter spreads and more predictable price movements. Stocks with high volume also tend to call for more institutional interest and that, in turn, increases the likelihood of the current trend continuing.

You can highlight stocks that are experiencing high volumes by monitoring the VWAP (Volume-Weighted Average Price) and volume spikes alongside price movements.

For best results, look for stocks that show increased volume at the same time as a price breakout. Stocks in situations like that could often be great swing opportunities.

Google (GOOGL)’s VWAP

The fundamentals are FUNDAMENTAL

News and Catalysts

Market-moving news and catalysts can be a swing trader’s best friend or worst enemy.

Keep up with financial news (and with those that concern your stock of choice in particular) and be aware of potential upcoming catalysts.

Rapid changes in stock prices often come down to news releases, earnings reports, or public announcements.

Consider, as an example, any of the companies in the technology sector. The announcement of a new product’s launch could give start to a bullish momentum, while regulatory setbacks, on the other hand, might cause prices to spiral downward. Tech and pharmaceutical stocks often experience significant price moves based on just these types of news.

Setting up news alerts for your watchlist or subscribing to financial news platforms can give you a timely edge. Alternatively, consult an online economic calendar regularly and carefully. Although not the best, free-access websites such as “MarketWatch” can still be very useful to day traders and swing traders alike.

MarketWatch economic calendar

Sector Rotations and Trends

The last few years have seen the Tech sector dominating all others. Currently, the “Magnificent 7” – Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), Nvidia (NVDA), Tesla (TSLA), and Meta (META) combined represent around 30% of S&P500 weighting. But this wasn’t always the case in the past and it won’t always be the case in the future either. From time to time, investors’ interest (and money) moves from one sector to another. That’s what the market calls “sector rotation”.
The ability to predict future sector rotations could give swing traders the opportunity to short stock from one sector while simultaneously going long on stocks of a different industry.

PRACTICE, learn, improve, and refine

Swing traders need to be dynamic. There is no way around that.

Remember, what worked yesterday might not work again tomorrow.

Constantly analyze your trades, learn from your losses, and adapt to evolving market conditions.

Keeping a trading journal can help track your decisions, refine your strategies, and better understand the dynamicity of the stock market. (Trade the Pool has thought of this too. Check out our fantastic offer on Tradervue, best trader’s journal you could put your hands on).

Conclusion

In essence, finding the best stock to swing trade involves a blend of volatility analysis, trend-following techniques, and careful market observation.

By staying dynamic, practicing and improving your technical analysis skills, and remaining up to date with news catalysts and sector shifts, you can significantly increase your odds of success at swing trading.

It is important to keep experimenting, analyzing, and refining your strategy, as the market will always be full of fresh opportunities waiting to be explored by savvy traders like you.

I hope this helps.

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