The Best of the Battle Plan: Stocks for Swing Traders

Over the past week we have taken on five new positions in the TradingMarkets Battle Plan model portfolio, and three exits. All three exits were profitable. While we can't promise that every week will be as successful as the past week was, the signals that produce our long trades have yielded approximately 70% winners since 1995 in our simulated trading backtests.

Our approach in the TradingMarkets Battle Plan is simple: we look for the highest Short Term PowerRatings stocks and the deepest pullbacks. Then we compare these stocks to those suggested by some of our most successful, proprietary trading systems. When we see matches - stocks that are essentially receiving multiple buy signals from different, uncorrelated methods - we know that we may have a trading opportunity to be taken advantage of. These are the stocks we share with our TradingMarkets Battle Plan subscribers every morning - at least 30 minutes before the markets open.

Let's take a look at a sample trade from the past week.

Nuvasive Inc. (NUVA | Quote | Chart | News | PowerRating) was a stock we took a position in on August 19. NUVA had a Short Term PowerRating of 10 and a 2-period RSI of less than 3.

Stocks with Short Term PowerRatings of 10, based on our research, have outperformed the average stock by a margin of nearly 17 to 1 after five days. We have also found that stocks that are trading above their 200-day moving averages and have 2-period RSIs of less than 2 have produced positive returns in one-day, two-day and one week timeframes.

This contributed to making Nuvasive a particularly attractive trading candidate. We suggested an entry range of between 2-6% below the stock's last close and waited for the stock to come in.

Come in it did, filling our order on the 19th and positioning us long NUVA at 49.33 (at least for those who took a position at the upper end of the suggested range - as many TradingMarkets Battle Plan traders and subscribers do). See #1 in the chart above.

Our exits in Battle Plan trades are simple: we look for closes above the 5-day moving average. Because we are buyers of weakness and sellers of strength, we enter positions after they have pulled back, and exit positions on shows of strength - such as closing above a short-term moving average like the 5-day.

NUVA did just that, and only a day later on August 20th. Closing at 52.15 on that Wednesday, we alerted traders of the move Thursday morning before the market opened, encouraging our subscribers to exit on or shortly after the open. See #2 and #3 above.

The results? A gain of 2.19 points (2.82 points for those who exited on the August 20 close) in less than 48 hours. Traders who bought 100 shares of NUVA at the top end of our suggested entry range would have exited less than two days later up more than 5%.

Again, we cannot guarantee that all of the trades in the TradingMarkets Battle Plan will work out this well. What we have done is to create a trading service that is based on our core values and principles as traders: buy weakness and sell strength (i.e., pullbacks not breakouts), stick with high win-rate, high probability trading strategies, and be wary of overstaying your welcome.

It is this approach to trading that has not only served us well as traders but also has the benefit of historical backtesting going back more than a decade. This is what helps give us the confidence to buy when others are selling and to sell when others are buying. It is a time-tested - and backtested - route to short-term trading success.

Spend 3 Days with 21 of the Best Traders in the World!

Sound too good to be true? It's not. For a select group of traders, this will be a reality at TradingMarkets 2008 on November 14-16, 2008 at the luxurious MGM Grand Hotel and Casino in Las Vegas, Nevada.

Victor Sperandeo. Gil Morales. Raghee Horner. Gary Kaltbaum. Steve Nison. These are just a few of the top traders in stocks, forex, options, futures and exchange-traded funds who will be speaking and working with traders just like you at TradingMarkets 2008. Don't miss the special event! Click here for more details!

David Penn is Editor-in-Chief at TradingMarkets.com.