Finding Stock Entries: An introduction
By: Tanner Yarton
Introduction
Fellow finance enthusiasts,
Today we will be discussing how to find entries on stocks to swing. I personally have been utilizing this strategy with moderate levels of success for some time and I believe its paramount to the success of any trader.
Lets start with some basics: What is a stock entry? To put it simply, a stock entry is a point in the price action where the risk/reward of the trade becomes significant. Without proper entries, we are simply guessing on the direction of a stock, or gambling for short. Stock price action is filled with patterns, and we will discuss those, and how to utilize them for success here today.
I understand that everyone’s trading strategies are different, so for the purposes of this article I will be using a very simple chart layout that has: volume as well as the 10, 20 and 50 moving averages. It will look like this:
Green bars are up, grey is down. the black line across the volume represents the average volume, and each moving average represents the average of the # of candles attached to it, I.E 20SMA is 20 candles average price.
Examples
Lets get into some examples where I go through successful trades based on good entries.
Example #1: reversal of trend
NIO 0.00%↑. One of my most profitable trades of 2020, has an extremely textbook set of patterns on the daily chart. Here it is with annotations to follow:
NIO 0.00%↑ Notes:
Enter a stock when the moving averages are 'converging' or crossing
Enter on above average volume days that hold the gains, and don't walk them back down to opening price or lower
Ensure a full candle close below the moving averages to exit the position! its easy to get emotional in the trade if it begins to slip. Fake outs are possible but with proper entries, they can be avoided.
Example #2 ARHS 0.00%↑ Inside day
Another of my favorite entries is the inside day pattern.
Notes:
Inside days are one candle fully contained within the price range of the candle before it. Its like a consolidation on a very small scale.
Entering stocks in uptrends are advised. Short term trades (1-5 days) or bottom entries can be good, but don’t often end in a nice long uptrend.
Long wicked candles that dip below the moving averages and close above them are bonus points for a good entry. High closing range candles are my favorite.
Example 2 continued:
CAT 0.00%↑ chart with annotations. Similar inside day setup
Example 3: higher lows, similar highs
AXON 0.00%↑ Axon Enterprise, higher lows put in after wedge pop (Oliver Kell strategy)
Notes:
Very similar to the first example but better defined AXON 0.00%↑ shows a nice wedge pop over the moving averages to signify a change in trend.
Cant say this enough, looking for above average volume on these moves is crucial to the stability of the breakout
Example 4: High closing range
The closing range is something I covered In a previous article, but let me give you a refresher.
The formula is (close-low)/(high-low). When looking for a strong closing range, I’m hoping the candle achieves a level of 85% or better.
Example 4 continued: CLFD 0.00%↑
Here is an entry I took on CLFD 0.00%↑ using the closing range strategy some weeks ago. Not only did CLFD close above a key resistance area, but it also achieved a closing range of 87%, perfect for an entry.
The perfect entry exists in every setup. As I mentioned before, fake outs can happen, but if done right, utilizing this strategy of entries can greatly increase success rates on all timeframes.
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Thanks for reading!
Tanner