It is a holiday on Feb. 21. The stock market is closed.

The market remains in conflict. For this reason, I am limiting the amount of capital I deploy to swing trades. My current cap is 20-25% of my capital; deploying less is also fine. This amount can spread out over multiple trades, if I see them, or concentrated in a few positions.

Also, if trades do trigger me in, I am “keeping them on a tight leash” meaning if they drop back right after, I am closing them out. Its got to show me strength. If a stock is well into profit, I will trail my stop loss to get out if it reverses. We know conditions are not great out there. Give the market respect; take the money it gives you, and don’t give away any more than necessary.

I didn’t add any new trades from last week’s stock list. Trades from the prior week are in profit or closed out near flat or for a small profit. Very few stocks have set up how I like recently

There are a few still setting up, like SM, TGA, FANG, OVV, CNQ, MTDR on the US side

PEY.TO, OVV.TO, CNQ.TO, and WTE.TO on the Canadian side.

These are contraction patterns, and the contraction may be the handle of a cup and handle pattern.

I am day trading stocks every day right now. I will briefly outline the method I am using below.

How the Market Indexes Are Doing

I look at 4 different US indexes because they each tell a different story about overall stock market health. The stock market is healthiest, and swing trading stocks on the long side is most profitable, when all these indexes are in uptrends.

I have also started including 2 Canadian stock indexes for those in Canada.

Charts are provided by TradingView – the charts I personally use.

All the US indices are in downtrends. We did get a follow-through day in the S&P500 (and Nasdaq 100) in late January (see “market health indicators” article in the section below). That is the first potential signal to start buying again, which is why I am willing to allocate some capital to trades if I see ones I like. But the market health indicators also have to improve in order to for me to start allocating more capital. That hasn’t happened yet. If markets continue to drop, there are very few trade signals to take anyway.

The TSX Composite index in Canada rallied back toward the highs recently, fueled by commodity stocks, but that has also turned lower recently.

Tread carefully and lightly, if buying into swing trades.

State of the Market Health Indicators

The following chart shows the market health indicators I track. They tell me the condition of the stock market overall, and whether it is a good time to be swing trading individual stocks.

All combined, these indicators are weak, indicating conditions are not ideal for initiating long swing trades.

• 33% of S&P 500 stocks are above their 50-day moving average. 35% of all US stocks are above their 50-day moving average. It is generally much easier to swing trade profitably (on the long side) when more stocks are above their 50-day average. When this is below 50%, it tends to be sideways or downtrends for most stocks/indexes. We are below the 50% but improving since late January. Watch if the indicators starts dropping below its recent rising trendline; that’s not good.
  
  
• On Day 6 of the attempted rally there was a 1.25%+ gain and volume was higher than on Day 5. That mattered for the Follow-Through day (the Throw-up day—big sell-off following a follow-through day— is just something I made up), but Feb 11 and Feb 17 were big drops on heavy volume.
  
  
• This inidcator is not currently working for me on TradingView, so I have pulled it off for now. The red bars are showing Upvolume divided by Totalvolume on the NYSE exchange. Above 0.9 or below 0.1 are values I tend to watch for. Nothing of interest here currently.
  
  
• The blue bars are the daily percentage movement of the S&P 500. Big moves are associated with downtrends and turning points. Small values are associated with an uptrend. Values of -2 are a warning sign anytime they occur. Big drops on Feb 10, 11, and 17 show this is still downtrend behaviour.
  
  
• The blue line is the cummulative NYSE Advance Decline Line. It is as weak or weaker than the S&P 500, so it is confirming the downtrend currently.

What Am I Doing Right Now

I am scanning for stocks to buy that I like the look of. I am willing to deploy some capital…approximately 20-25% of my account to long swing trades. The rest stays in cash or is used for day trading.

I do enjoy day trading stocks during times like this because it’s possible to grab several percent in a matter of 10 or 20 minutes in stocks that are moving (and many are). I am primarily day trading stocks with recent earnings, but I am willing to trade any stock with the potential to move significantly.

Here are a couple of Twitter threads that show how I am day trading earnings. Click on the post to see the follow-up posts, charts, etc.

#Earnings Day Trading Watchlist for tomorrow. $DASH (up 30% after hours) $FSLY (down 30% after hours) $HST $INFN $IRT $KAR $KGC $MRO $AIG
More reporting before the bell tomorrow, so list may be expended then.

— Cory Mitchell, CMT (@corymitc) February 17, 2022

Lots of companies reporting #earnings after the bell today and tomorrow before the bell.
Big ones today include $ABNB $DVN $RBLX $UPST
Tomorrow: $CROX $GOLD $TTD $SHOP $HLT
Charts show the full list with a few filters. Shorter lists are stocks still above their 200-day MA pic.twitter.com/ijmt6F9eF5

— Cory Mitchell, CMT (@corymitc) February 15, 2022

To learn more about scanning to find explosive trades, as well as everything else you need to know about swing trading, check out my Complete Method Stock Swing Trading Course.

By Cory Mitchell, CMT

Disclaimer: Nothing in this article is personal investment advice, or advice to buy or sell anything. Trading is risky and can result in substantial losses, even more than deposited if using leverage.