Bulkowski's Swift Transportation (SWFT) Trading Quiz

What chart patterns can you find? Look for the following (if you find others, great!): Ascending broadening wedge, small head-and-shoulders top, Eve & Adam double top, broadening bottom, falling wedge, symmetrical triangle.

The symmetrical triangle shows a downward breakout (A) in which price returns to the triangle trendline boundaries, breaks out upward, and closes above the top of the triangle, busting the downward breakout.

Question 1: Do you buy, short, or avoid trading this stock?

Question 2: If trading this one, what is the target price?

Question 3: If trading this one, what is the stop price?

Answer 1 (buy?): Since the latest breakout is upward after a downward breakout, buy.

Answer 2 (target?): Measure the triangle height and project the height upward from the breakout. Here's the math: 18-16.25+17.65 = 19.40. That's a rise of 10%. I picked a target using overhead resistance, shown as the green line and knot of resistance circled.

Answer 3 (stop?): My notebook entry spells out the details, but it's point A on the chart.

"Date: 10/25/05 placed after market close today. Bought at: 18.06 on 10/26/05. Stop: 16.53. or 8.5% away. (2 cents below point A) Upside target: 21 (circled), site of some resistance, also some at 19. Future S&P direction (guess): Up for a few more days until it hits a symmetrical triangle in the index and then tumbles. Buy reason: busted symmetrical triangle."

Price has climbed since purchase.

Question: What do you do now? Do you trade the stock or what? The answer appears on the next page.

From my notebook: "11/3/2005 After the close: Stop raised to 17.38 since the stock made a new minor high.

11/7/05 Stop raised to 17.67. This is below the Fib retrace and at the top of 10/28/05 daily pipe bottom.

11/10/05 Stop raised to 17.93 as the stock makes a new high but the stop is still below the 62% Fib retrace.

11/11/05 Stop raised to 18.47. Big day (up $0.68) as the stock was upgraded by a broker. This is just below the 50% Fib retrace value and below 18.50 round number."

The above chart shows the price action after I bought. Price made a good move uphill.

Question: Is it time to sell, buy more, or just hold on?

Notebook: "Date placed: 11/22/05. Order type: buy stop at 20.76. Bought at: 20.7585 on 11/23/05. Stop: 18.47. Placed 11/23 Upside target: 24. Future market direction: Up. S&P is moving up parabolic and I'd be surprised if it continues much longer. Indicators: CCI (commodity channel index) should signal a buy tomorrow if price moves up. Bollinger bands: price is nearing the top of the band. Industry: Almost all are moving up robustly. SAR (support and resistance): 21-22 during April 2005, 23.50 or so. Buy reason: Big W breakout upward, confirming the chart pattern. Oil prices have been trending downward.”

Question: Did I made the right move, to buy more?

Notebook: "Date placed: 11/28/05. Sold at: 19.1865 to 19.25. on 11/29/05. Sell reason: The stock has made a large down move today, following the market lower and others in the industry down. I believe this will move lower, forming a handle to the Big W. On the intraday scale, 1-minute, there's support during the last 1.5 hours at 19.46. I placed the stop below round number support at 19.43. In short, I raised the stop to 19.43. I should have placed the stop at 19.80.

The stock moved much lower on the open and I sold near the intraday low. The stock recovered but it took 20 minutes with 4 downward price lunges before recovering.

As you can see, the stock continued to drop before recovering and heading back up. I ended up losing 1.3% on the two trades, combined. Sigh. Good idea but bad execution. I should have expected the retrace after the stock move higher and then rode it up to 24.