Savers put away for a rainy day. Investors put some savings to work with market forces against the eroding effects of inflation. Traders look for investments that provide the potential for a quick exit in a short period of time.
Quick Look: The Best Swing Trade Stocks for this Year
- Advanced Micro Devices (AMD)
- Nvidia (NVDA)
- KEMET Corporation (KEM)
- Netflix (NFLX)
- Amazon (AMZN)
Swing Trading Overview
A Trader’s Intention
Swing traders hold positions for a few days or a few weeks, depending upon the market action once a trade has been entered. In order to make money trading a stock, its price must swing.
Beta (β) as a measure of volatility can also be a measure of potential swing trade profit. The higher the beta, the more severe and greater number of price swings the tracked stock is likely to experience. Using beta (β) as a measure of volatility, those stocks with the most potential for frequent large percentage moves will be identified by a higher beta.
A swing trader’s intention is to sell within a relatively short period of time, days or weeks, and the timing of the sale will most influence the profit on the transaction. A swing trade stock must be liquid in terms of daily volume of shares traded so the buy or sell orders can be executed instantly.
Those selected are further trimmed for liquidity by sorting for average daily volume to assure prompt delivery of traded funds or securities upon settlement. By setting a minimum price of $10, a further sort can eliminate many low-volume and unprofitable companies.
Fundamental analysis provides information on a company’s earnings history and analyst expectations to determine if what has been the trend will continue. Expected market price rises and earnings gains can provide an estimate of what to expect over a longer term.
But earnings announcements only occur every three months, so once the investment has been made, the decision to hold or sell will depend upon the swing trader’s read of current market trends, or technical analysis. Technical analysts follow what traders have been doing in order to predict what they will do.
Technical analysis of a swing trade involves moving averages which cover a swing trader’s chosen time frame. A moving average is an average price at which a security has traded over a certain previous period of time. Common multiples of periods used for moving averages are 20, 50 and 200. Those multiples might be denominated in minutes, hours or days.
Three moving averages with a range of multiples, running parallel to each other, indicate a longer-term trend. Swing traders do best when trading a channel around a trend-line wide enough to capture a profit. A swing stock, like tire and rope swing attached to a tree branch, must stay within a predictable distance from the trend-line.
The Best Swing Trade Stocks This Year
Here are some of the best performing swing trade stocks this year. Picks are based on historical performance, trade range, and more.
1. Advanced Micro Devices (AMD)
Advanced Micro Devices (AMD) has a high beta and plenty of volume and earning expectations that would support an uptrend. AMD has traded as low as $9.04 and as high as $34.14, so its range is greater than its current share price.
2. Nvidia (NVDA)
Nvidia (NVDA) just announced the end of a cryptocurrency mining boom and its stock price dropped $38 at the opening bell on November 16. Officials at NVDA state that demand for their graphics chips has dried up. Nvidia now trades for nearly 20% less than its close on November 15.
3. KEMET Corporation (KEM)
KEMET Corporation (KEM) makes electrical components like capacitors, sensors and actuators. The company has been in business since 1919, but an uptick in demand has recently exploded its earnings expectations.
4. Netflix (NFLX) and Amazon (AMZN)
Netflix (NFLX) and Amazon (AMZN) are pricey per share but their earnings expectations signal they will continue their dominant trends.
|Symbol||Company Name||Beta||Price||Expected One Year Price Gain||Expected One Year EPS Gain||Average Volume|
|AMD||Advanced Micro Devices||5.05||20.66||16.99%||117.24%|
Source: Yahoo! Finance
Swing traders can make money in up or down markets. In order to directly profit from a dropping market, an investor must borrow stock to sell it short, which involves leverage, or use an options account and involve another complexity.
Buying stocks during market uptrends is like having a safety net of overall economic growth that supports all markets.