Trading Breakouts In A Low Volume Choppy Market | Podcast Episode #46

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Learn to trade, stocks successfully, learn to profit consistently. I’m Ryan Mallory and on my weekly podcast, I’m going to teach you the in and out of a complex ever-changing stock market. You will learn to trade better trait, smarter and profit bigger.

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Now let’s go trade. Hey everybody, this is Ryan Mallory with swing trading, the stock market this episode, we’re going to talk about trading breakout plays and a choppy low volume market and they’re not easy. And that’s why we’re talking about it today because a lot of times people get frustrated with these kinds of poise because the markets simply not providing enough supportive momentum to boost these stocks higher. And that’s what we have with the S&P 500 right now, we have it with the Dow, we have it with the Russell, we have it with the NASDAQ Listen, the NASDAQ but overall, we still have have some issues.

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And that’s where the top down trading strategy comes into play in this kind of Market. Because with the top down trading strategy, you’re able to find some of the hotter plays and the market by evaluating sectors and industries. That might be moving with a little bit more gusto in a sideways choppy Market overall. But yet you have these sectors or you have these particular industries that might be ramping up. And moving higher. So, like right now, we have an S&P 500. That’s, that’s really just not moving that much, but you still have Tech and discretionary that is that’s moving up and you also have energy. That’s been pretty pretty solid of late as well. So you try to focus on those kind of plays first foremost, Now, one of the things I also guard against is not getting too many plays in the portfolio without some gains to back them up. So you don’t want to be 150% long.

1:57
You know, dipping into margin trying to compensate for a very non-committal Market by just adding more long exposure because when you add more long exposure, hey, look, the market could reverse and a lot of times the reversals happen when you have a very dull Market where there’s not a lot of action, where you’re only moving, maybe two or three points a day on the S&P 500 that’s what the S&P. Hunter was like, right before we sold off in the fourth quarter last year. You have to be aware of that. So you don’t want to be dipping into margins just simply because you’re trying to replicate the momentum that you might have had. In January, when the market went through the roof, you can’t do that. You still need to manage risk.

2:32
Just as just as cautiously as you do and a down Market, or in a super bullish Market, that’s getting overheated. So when it comes to break out plays, when you’re when you’re playing a breakthrough resistance of some kind, or if you’re playing a even a bounce off of a A rising trend line. I know. That’s not a breakout play, but still, even if you’re trying to trade one of those, they can still be traded. Okay. You can still trade the breakouts. However, there’s some things that you need to know about. First, you got to have patience, these breakouts are, just not always going to break through resistance.

3:04
And then all of a sudden just storm, 10% higher fact, it’s an anomaly. When it happens in this kind of a market, you can’t do that. Instead, you have to be patient, you have to let the price do its thing and sometimes it’s going to Little bit ugly and you’re going to have these entered a swings that you’re thinking what is going on here. But look at the General market. If there’s not a lot of panic in the selling on the intraday swings lower than, that’s a good sign that the markets probably going to bounce back up before the end of the day or in the days ahead. So patience pays you have to show some patience in this market because it may take five or six days after the break out for a stock to finally start creeping higher because it just doesn’t have a lot of winds, pushing it sales forward.

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The other thing, you have to be Weary of his head fakes they can happen and it doesn’t take a lot for bad news to really break down a stock. Something furiously be aware that head fakes do happen and they probably happen a lot more frequently and choppy low volume Market.

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One thing to remember, though, with the head fakes is that just be closed because it breaks back below the breakout level or the broken resistance or or now support that doesn’t necessarily mean the trades over because it’s going to be a little bit less committal to the upside. There’s going to be a little bit of reversion to the mean. It may dip below the breakout level and you just have to kind of go with it. You know you have to honor your stop loss is first and foremost but the trade is not over. It’s not a lost cause if it does break back below the breakout level.

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Now some people say well in these kinds of markets, shouldn’t you just fade every Market move? I mean, yeah, you can do that. If you’re looking to play Gap fills in the morning, like if you’re trying to fade the SP that’s opening up 10 points, Higher One morning, or say now, it’s just going to fill the Gap. That’s it’s one play. I don’t think that’s a bad way to go about it.

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However, fading fading bigger Market moves where you’re trying to make 10% off of a stock drop in lower. It’s going to be just as harder if not harder. Because here’s the thing for those two really work, you need a bigger range and like, right now, with the S&P 500, you’re in a very small range. So with the Fades, you have to really temper, your expectations of what you actually can fade. You can’t get necessarily 10% move because it’s stuck in a very small range that oftentimes doesn’t include 10% worth of price action. Action. So you have to understand that you may not have the greatest win-loss ratio in a very choppy Market because the stocks that are less likely to really play out in your favorite, they’re less likely to really do what you want to do right away and so often times, you have to bail on the position because it’s just simply not moving.

5:33
So you need to take that money, put it into something that shows more promise, and more opportunity to actually move higher. Here’s a good thing though. You take smaller losses, typically and a choppy Market. The reason for that is that the range isn’t that big. So unless you’re holding through earnings, or you get hit with a news event, which is actually happened to me twice this month, not too bad. I took three and a half percent on one and four and a half on another is recoverable fact. Those are the only two losses that I’ve closed out so far this this month, everything else has been winners. But they’ve been not the biggest winners either, because why, we’re in a choppy low volume Market, but typically you have smaller losses in these kinds of environments.

6:09
And the reason why is it is that the stocks just aren’t moving as much. So that’s a good thing. So you can use tighter stops in this type of Market, as well. And finally, I just want to close by saying in this has been a pretty short podcast, but it’s worth saying one more time. Patience pays in this kind of Market don’t have these ridiculous expectations that a stock trading at a hundred dollars, is somehow going to be trading at $120 in a couple of days when there’s not a lot of Market juice. There’s not a lot of action from the broader markets or even most of the sectors and industries right now. So you got to use that top down trading strategy that I always talk about where you’re not only evaluating the direction of the market but you’re also trying to find the hottest sectors and industries within the market that are pushing them, helping push the market higher.

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And if you do that and you manage your losses, come into the trading and a low volume choppy Market environment with the understanding that, okay? You’re probably going to have a few few more losses than than usual, but they’re going to be smaller for the most part and yes, you may have some pain, some Some head fakes that work against you, but if you show the patient’s you manage the risk, things things should work out just fine for you.

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That’s going to do it for today. If you have any questions, feel free to email me. Reach out to me, ask me any questions you want to always try to get back to you. Sometimes it might not be the same day but I do get back to all my people who follow me and ask questions. So have a great day and have a happy Easter.

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Thank you. God bless. Thanks for listening to this week’s podcast of Swing trading with Ryan Mallory. I’d like to encourage you to join me in the SharePlanner Trading Block where I navigate the financial markets every day with Traders from around the world. With your membership you’ll get a 7 day trial access to my trading room and text and email alerts.

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If you have any questions, please feel free to email me ryan@shareplanner.com or call the office at 321-522-6733 all the best to you and God bless.