Support for Swing Trading

About Types of Swing Style Runs

Support and resistance are often areas of Technical Analysis that are not fully understood. This week the lesson will be on support for Swing Trading which includes Momentum Runs, Velocity Runs, Volatile Runs, and Intraday Swing Style Runs.

Swing Trading is a “one run” trading style, which can be as short as a few minutes intraday or as long as 10-12 days depending upon whether it is a standard Swing Run, Momentum Run, or Velocity Run. Swing Trading runs also appear in volatile conditions, as two major Market Participant Groups collide buying and selling against each other. The key to understanding how support will behave and whether it is sufficiently strong enough for the trading conditions as well as the trend, sentiment, and market bias is to learn how to interpret who is controlling price which defines how support will hold or collapse.


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Dark Pools control vast quantities of shares of stock, trillions in assets worldwide and use the largest lot orders. Dark Pools are giant and large Institutions both on the Buy Side and Sell Side and when they buy, this creates underlying energy building as they remove liquidity on the buy side with their large lot accumulation activity.

Support is less viable when the giant Institutions are not actively buying the stock, and price can over-react to even minor profit taking by the Professionals who also use larger lots.

The chart example below had a standard Swing Run out of an extreme sell off price action.


chart example with a standard swing run - technitrader

Selling was triggered by Volume Weighted Average Price VWAP orders which activated as volume rose above average levels. These are automated orders. There was no support to halt the run down, until the stock fell into an earlier Dark Pool Buy Zone™ that formed a few months after it IPO’d.

This type of support for Swing Trading is stronger because more accumulation is likely at this level. As the stock ran with standard Swing Run pattern it encountered two days of profit taking in between each day it ran up, forming a white longer candle. This is weaker support, even at the extreme sell off conditions. The first run up has long tails and wicks, common when there is a mix of sellers and buyers that are almost equally weighted.

Summary

However as the stock climbs, bias shifts to the upside and candles shrink to Resting Day patterns. In this instance intraday support levels are very weak, the more reliable and consistent support is at the lows of the white one day run up candles. If intraday support is used on a standard Swing Style Run which lacks strong momentum, then whipsaw intraday is a huge risk. This pattern overall has weaker support as it climbs vertically.For more information about Swing Trading:

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Trade Wisely,
Martha Stokes CMT
TechniTrader technical analysis using a MetaStock chart, courtesy of Innovative Market Analysis, LLC dba MetaStock


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