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Swing Trading: Bear Markets, Black Swans and the 200-Day Moving Average

Mad Money

Writing about the 200-day moving average, Larry Connors, CEO and founder of TradingMarkets and Connors Research, explained:

When we look back and isolate the one rule which has had the single biggest impact on our trading and our strategy creation it is this one ...I originally published this research on my TradingMarkets.com website in 2003 and we update it every few years. As time passes the sample size gets larger and the test results became further entrenched ...In no way did we envision a 2008 scenario when we added this rule to the majorityof our equity strategies many years ago. In 2008, we were very glad we did, as were many of our customers who rely upon our research to manage their money and their clients' money ...In short term trading we're constantly looking for edges. Included in those edges is making sure we're not in stocks that are going to drop from 40 to near zero as Washington Mutual and many other companies did.Buying stocks that are above their 200-day moving average has helped many traders and investors preserve their capital and increase their wealth. Stick with these stocks. When the next bear market occurs, you'll be glad you did.

For more trading insights, including the latest research on risk management for short term swing traders, click here to watch Larry Connors' latest swing trading presentation: 4 Key Rules to Swing Trading and Risk Management .

Reporting quarterly earnings on Thursday was retailer Jos A Bank Clothiers (JOSB | PowerRating ) and tax-preparer H&R Block Inc (HRB | PowerRating ) . Both stocks were trading near break even levels by session's end.

Campbell Soup Co (CPB | PowerRating ) is the biggest name on the earnings roster for Friday. The company's stock finished in overbought territory below the 200-day moving average earlier in the week, and is moving sideways ahead of trading on Friday.

Update: 5:01 p.m. ET. Netflix Inc (NFLX | PowerRating ) down more than 12% afterhours on Thursday after news that Starz Entertainment is ending renewal contract negotiations with the online media provider.

Here are 7 Stocks You Need to Know for Friday

Selling in financials weighed on markets late in the week. Selling off by more than 3% after rallying into overbought territory below the 200-day moving average are financial stocks like Goldman Sachs Group Inc (GS | PowerRating ) , Wells Fargo & Company (WFC | PowerRating ) and Citigroup (C | PowerRating ) .

A pullback in Apple Inc (AAPL | PowerRating ) ? Shares of AAPL have closed lower for the past two days in a row, dropping by nearly 1% on Thursday, but are not yet in oversold territory above the 200-day.

New to Swing Trading? Read our primer, What is Swing Trading? .

Peet's Coffee & Tea (PEET | PowerRating ) pulled back by more than 3% ahead of trading on Friday. The stock, which trades above its 200-day moving average, will require additional selling in the next few days before becoming technically oversold.

Lower by just over 1% on Thursday were shares of Starbucks Corporation (SBUX | PowerRating ) . SBUX had closed in overbought territory above the 200-day moving average on Wednesday after gaining for three days in a row.

A classic example of an overbought sell-off below the 200-day moving average, shares of Supervalu Inc (SVU | PowerRating ) dropped by well over 5% after closing in overbought territory below the 200-day for three days in a row.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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