The stock indexes are attempting to breakout to new highs. The Nasdaq 100 had done so, the S&P 500 is consolidating just above prior highs, and the NYSE Compose and Russell 2000 indexes are just below prior highs.

So we still have a bit of choppiness going on, but the indexes are all pushing at their highs and trying to move higher.

I am taking long trades, but keeping some cash in reserve because of the one yellow flag in the market health indicators (discussed below). Although, I do think the indexes will continue to push higher.

Since all the indexes are near highs, I am primarily focused on Contraction Pattern strategy trades.

All the market health indicators are in good shape, except one, which is why I am only deploying part of my capital.

The percentage of stocks above their 50-day moving average (top indicator) is right near 50%. I find trading much easier when that percentage is higher.

The Complete Method Stock Swing Trading Course covers my swing trading approach in-depth. It also lays out exactly when to trade four different strategies (that suit different market conditions), and how and when to scale back when conditions aren’t ideal. Trading when conditions aren’t right will typically lead to giving back all the gains accumulated during the good/easy times.

US Stock Swing Trading Watchlist

This week I revised the StockRover scan criteria by reducing the threshold on 200-day MA from 150 to 120. Basically this means “look for stocks that are at least 20% above its 200-day moving average” instead of 50% above as it was before.

This change increased the number of stocks on the scan list to 287, up from about 100 over the last few week.

Contraction Patterns and Close to Setup
Added this week:
AMC – careful, prone to gaps
TGLS
CALX
ZLAB – Between a half cup and full cup (cup and handle pattern) LCTX is similar but not as clean
VALE
EXTR
RLGY
AB
SLM
TPX

From last week’s list:
PLL – Was pretty messy, but tightening up over the last couple of months.
GPRE – Already consolidated. Variation pattern. Still near entry.

Contractions That Still Need to Move Up and Consolidate
Added this week:
SB
DELL

From last week:
BW – This pattern is really big and loose. Want it to tighten up before I consider it.

I didn’t add any trend channel trades this week (didn’t look for them) because the indexes are near highs, and if we breakout, I prefer being stocks that have been strong, have consolidations near highs, and will thus have likely strong breakouts if the indexes move up.

Canadian Swing Trading Watchlist

With the altered 200-day MA parameter, there were 87 results on the scanner this week, versus around 50 the last couple weeks.

Contraction Patterns Close to Setup
From last week:
PHA.V
HWX.TO (variation pattern – see Swing Trading Course)
DME.V – Consolidated. Could now be a variation pattern. Or if it drops, it will need to rally back and form another consolidation.
FOM.V
STLC.TO – A little far from the highs, but if it consolidates here it still could be a nice setup.

Added this week:
TN.CN

Contractions That Still Need to Move Up and Consolidate
RKS.CN
MGRO.CN

By Cory Mitchell, CMT

Want to learn how to scan for and trade these patterns? Know which ones to trade and which ones to leave alone? Learn this strategy and others in the Complete Method Stock Swing Trading Course. 

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.