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22 swinging stocks for quick-hit profits
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Other opportunities for swing traders are provided by extenuating circumstances, such as uncertainty over earnings reports or broad market sell-offs sparked by random fears. But more commonly, opportunities arise when there is very simply a lull in the buying action, sort of like halftime in a football game or the time between dinner and dessert. The psychology of these lulls is understandable if you think about why the price is rising: When a big fund manager at Fidelity decides to take a 5% position in a stock, he or she may buy 20,000 shares every day for a week or more, driving up the price, and then back off and wait for awhile to see if it will settle down before buying again. Thats when you pounce.
Swing traders love to buy stocks near one-year or all-time highs, because there are no long-frustrated holders anxious to sell as the price finally gets back to their break-even points. Its these lulls that provide the most low-risk swing-trade entries. In other words, you want to buy when a stock is ambling along a lofty plateau for days or weeks -- not when theyre shooting higher day after day.
A swingers checklist
So now lets use these principles to find stocks to swing-trade. Heres a checklist for the job:- Ensure that the intermediate-term action of the broad stock market is bullish. (Major indexes should be above their average prices for the past 30 weeks.)
- Focus on stocks whose entire industrial sector (e.g., truckers or semiconductors) is on the move.
- Focus on stocks whose capitalization group (e.g., small or mid cap) is on the move.
- Focus on stocks that are trading near all-time or multiyear highs, but have backed off a little in the past few days or weeks.
- Focus on stocks whose trading volume is increasing along with share price.
- Give preference, when forced to break ties, to stocks that are advancing up out of long bases, or periods when the shares have traded within a narrow range.
- Also give preference to stocks whose underlying companies fundamentals and valuation are generally supportive of higher prices.
One of the easiest ways to find stocks that meet these criteria is to use the Screener tool at MSN Money.
For instance, you can tell the Screener to find stocks ranked nine or 10 by the MSN StockScouter rating system that are members of in favor sectors and market capitalization groups; that are trading near their five-year highs and that are relatively flat over the past week or month. Click here for the screen that resulted in the following table.
| Swing trade candidates | | Company | Rating | Average daily volume/past month | Average daily volume/past year | 1/27/06 price | % from 5-year high | | L.B. Foster (FSTR, news, msgs) | 9 | 17,900 | 10,700 | $15.95 | 0% | | Radvision (RVSN, news, msgs) | 9 | 429,200 | 179,000 | $19.05 | -1% | | NewMarket (NEU, news, msgs) | 9 | 65,800 | 43,400 | $28.47 | -1% | | Wabtec (WAB, news, msgs) | 9 | 443,400 | 325,100 | $31.55 | -1% | | Emcor Group (EME, news, msgs) | 9 | 172,200 | 118,600 | $82.06 | -1% | | Aleris International (ARS, news, msgs) | 9 | 346,300 | 312,700 | $39.22 | -1% | | Valmont Industries (VMI, news, msgs) | 9 | 85,900 | 65,300 | $38.57 | -2% | | Veritas DGC (VTS, news, msgs) | 10 | 610,900 | 523,000 | $44.77 | -2% | | Giant Industries (GI, news, msgs) | 10 | 303,200 | 257,800 | $67.20 | -2% | | Lufkin Industries (LUFK, news, msgs) | 9 | 252,200 | 194,200 | $66.52 | -2% | | TradeStation Group (TRAD, news, msgs) | 10 | 1,077,700 | 328,300 | $16.85 | -2% | | Mitcham Industries (MIND, news, msgs) | 9 | 402,000 | 100,900 | $24.10 | -2% | | Neoware (NWRE, news, msgs) | 9 | 705,500 | 297,300 | $28.82 | -3% | | Ladish (LDSH, news, msgs) | 9 | 131,900 | 76,600 | $23.86 | -5% |
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Criteria: StockScouter 9-10; volume month > quarter & year; price near 5-yr high; sector & cap in favor.
All of these small-cap stocks on this list are in nice, smooth uptrends and are in industries that the Street finds attractive: L.B. Foster (FSTR, news, msgs) makes rails, ties and steel tubes for the railroad and mining industries; Ladish (LDSH, news, msgs) makes forged metal components for the aircraft construction industry; Wabtec (WAB, news, msgs) makes braking systems for locomotives and boxcars. As they trade up and then go sideways for short periods, they should all make good swing-trade candidates.
Two other sites that will help you find stocks like these:
-- The NYSE % Change in Volume page of the Big Reports section of Bigcharts.com. This page displays 100 stocks that have recently hit new highs, have a closing price of 12 or higher and trade a minimum of 50,000 shares a day, and are ranked by percent increase in volume. Scan the charts for the ones that have leveled off lately, and then dig deeper to research them as described above. A few that looked good at the start of this week, or would work on pullbacks, were lumber grower Deltic Timber (DEL, news, msgs), cement-maker Cemex (CX, news, msgs), real-estate developer Simon Property Group (SPG, news, msgs), insurer Assurant (AIZ, news, msgs) and Mexican broadcaster Grupo Televisa (TV, news, msgs).
-- The Top 100 Stocks page at Barcharts.com. Click on the column heading His Vol, which is an abbreviation for historic volatility. Then start your search for good swing-trade candidates at the bottom, which means you are looking for the markets strongest stocks that have the least volatility. Top candidates right now include shoe-store chain United Retail Group (URGI, news, msgs), cable operator Time Warner Telecom (TWTC, news, msgs) and apparel maker Guess! (GES, news, msgs).
| 8 alternate swing trade ideas | | BigCharts List | 1/27/2006 | Market Cap | Average daily volume | | Deltic Timber (DEL, news, msgs) | $52.49 | $645 million | 192,600 | | Cemex S.A. de C.V. (CX, news, msgs) | $65.45 | 23.1 billion | 3,441,200 | | Simon Property Group (SPG, news, msgs) | $84.03 | 18.8 billion | 2,036,400 | | Assurant (AIZ, news, msgs) | $45.48 | 5.9 billion | 1,075,000 | | Grupo Televisa (TV, news, msgs) | $84.20 | 10.3 billion | 997,600 | | Barchart List | | | | | United Retail Group (URGI, news, msgs) | $15.50 | 204 million | 119,402 | | Time Warner Telecom (TWTC, news, msgs) | $11.10 | 1.2 billion | 374,590 | | Guess? (GES, news, msgs) | $40.15 | 1.7 billion | 262,000 |
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Successful swing-trading starts with a narrowed universe and good ideas. But you must also develop a plan for taking profits and cutting losses. Those are big topics that I will cover later in the month, after we see whether some of the ideas listed above begin to pan out.
Fine Print
Two weeks ago, I proposed in a column a list of 10 tech stocks that would make you forget about Apple (AAPL, news, msgs) and Google (GOOG, news, msgs). So far theyre up 7.9%, vs. a drop of 7% for Google and 16% for Apple. Leaders are chip maker Broadcom (BRCM, news, msgs), up 22%; supercomputer maker Cray (CRAY, news, msgs) up 27%, and Broadwing (BWNG, news, msgs), up 17%. Broadcom was tracing out a perfect swing-trade pattern just before it shot up last week. Cray looks good right now.
Jon D. Markman is publisher of StockTactics Advisor, an independent weekly investment newsletter and editor of The Daily Advantage. While he cannot provide personalized investment advice or recommendations, he welcomes column critiques and comments at jon.markman@gmail.com; put COMMENT in the subject line. At the time of publication, Markman did not own or control any securities mentioned in this column.
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