Stocks move in momentum bursts during bullish periods in market. This is the basis for both pullback and breakout swing trading.
Stocks exhibit momentum bursts of 8 to 20% during this period( lower priced stock can even have bursts of up to 40%). Such bursts may or may not have clear identifiable catalyst. These bursts last for 3 to 5 days.
All such momentum bursts start with a range expansion. The price moves in the direction of range expansion. Range expansion basically means a day which is up bigger than last 5 to 10 days bars.
Pullback buyers buy in anticipation of such range expansion. They focus on the low momentum phase or pre range expansion phase characterized by range contraction.
A successful momentum burst will lead to immediate follow through and the momentum dies down in 3 to 5 days.
To find these kind of setups one of the ways is to scan for range expansion of certain magnitude. Everyday I run range expansion scans to find the swing trade candidates. Some of the good stups from last night scan are:
- HAIN (current open position)
- VC (current open position)
- ZLC (current open position)
- EMES (current open position)