Overall stock market health is in good shape, yet the indices did start pulling back last week. I don’t view that as a bad thing currently. Actually, I think it is great.

While I’ve been scanning the last several weeks, there haven’t been a lot of high-quality setups that have triggered. A pullback in the indices will give stocks more time to develop proper patterns, coil up, and then hopefully break out to the upside.

And if the stock market continues to decline, that is fine too. We just wait a bit longer to deploy our capital until stocks start moving up again and the price is breaking out of quality patterns.

Here’s the Stock Market Outlook for the Week of August 22, which covers the health of the market based on reliable methods.

So I’m pretty happy here no matter what the market does.

I was looking for Contraction Patterns and Cup and Handle Patterns this week.

Swing Trading Stock Watchlist

Pretty everything I see is just too ill-formed for me to consider it yet, or the patterns are only about 2-3 weeks, and so they need another week or more to mature. My original watching list had about 20 stocks that looked interesting at a glance…they pretty much all go eliminated upon asking the question “Does this look like other high-quality patterns I have traded in the past that have made me consistent money?” Nope. They didn’t. If you don’t have a lot of experience with these patterns, print off quality trade examples from the Course or articles, have them beside you while you scan, and compare them to current setups.

I debated not publishing a list this week, but it’s also important to show that sometimes you scan for nothing. In this case, I ended with a trade I currently own.

ARGX – which had a couple of breakouts already and is underway. Own it.

VET and VET.TO – could possibly trigger this week if it consolidates and breaks to upside. I like the overall context just a little bit under one month.

A lot of patterns look like MTDR and XOM…a bit too small and not fully formed yet. Will check back on these oil stocks next week. VET is probably the nicest one of the bunch as it is trading near its highs, but has the same issue.

Based on overall market conditions, it makes sense that I didn’t find much. We had a pretty much vertical run and now we are pulling back. We don’t want to find trades based on “seeing what we want to see”, we want them to be quality patterns.

The video discusses the stocks above, as well as a bunch that were eliminated, and why.

The Passive Stock Investing Using ETFs eBook is now available! Follow the guide to compound money in the background—in good market conditions and bad—with little effort, even while swing trading and day trading.

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.