In Swing Trades, Time Frames Are Key

There are over 8 points from the current price to the September swing, suggesting excellent reward potential. On the flip side, new positions can be sold on a breakdown of 200-day moving average support, which yields a risk target just under $10. This measures out to an initial reward-to-risk profile in excess of 7 to 1.

However, the stock faces one major barrier in the potential swing up to the high at $19.50. The May pullback started at the October breakdown from support at $14.25. This now limits actual reward potential to a test of the last high, which is still a decent trade, with 3 reward points and 1 downside point into a stop loss.

Traders can choose to play the larger-scale or smaller-scale swing, as long as they adapt their holding periods to fit this specific pattern. To accomplish this task, we need to look at the time element in several different dimensions. First, it took 111 trading days from the September high to the February low. The current uptrend has now persisted for 71 trading days.

This predicts that a continued uptrend from the current price level into last September's swing will take about 40 trading days. Of course, that number is just a target, because this isn't an exact science. It does suggest, however, that the stock could rally up to $19.50 by then end of July or early part of August, perhaps in response to earnings season.

The short-term trade into the May high requires a different swing analysis. When a stock moves from a correction back into its primary uptrend, the rally should make up lost ground with a swing size that's smaller than the preceding pullback. We can estimate this length by counting the number of downtrend days and then sub-dividing it by one half.

In this pattern, Blackstone topped out on May 6 and started to pull back. It bounced 21 trading days later, although it hasn't confirmed the new upswing just yet. The four-day low, as long as it holds, predicts a two-week recovery period that will end with the stock back above $14 around June 24.

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Alan Farley provides daily stock picks and commentary with his "Daily Swing Trade" newsletter.

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Know What You Own: In Wednesday's trading, the most active stocks include Citigroup(C Quote),Bank of America(BAC Quote), the S&P Depositary Receipts(SPY Quote), the Financial Bear 3X(FAZ Quote), the Financial Bull 3X(FAS Quote), the Financial Select SPDR(XLF Quote) and the PowerShares QQQ(QQQQ Quote).