Swing Trade Idea: TBT

Bonds are starting to move. Long term rates are creeping higher and bonds prices are reacting like they should (falling). I've been nibbling on TBT for a few months now and it seems like this trade is about to start moving.

As you can see from the chart below, TBT has been consolidating in a long wedge formation and is beginning to break out. One thing that jumps out at me right now is the huge volume that was traded on Thursday and Friday of last week. Here's the chart:Gameplan:

• Initial Entry Price--49.25
  
• Initial Stop Loss--46.00
• Initial Profit Target--60.00--sell 2/3 position
  
• Second Profit Target--75.00--exit rest of posisition
• Trailing Stop--once TBT closes above 55, the stop loss will be moved to 49.00 and the entire position will be closed out if TBT closes below an ATR Trailing Stop set for 20 periods with a 3.0 multiplier.
  

There you have it, the full game plan. Now we just need to put the trade on (I'm gonna add a fresh position to what I already have and manage the entire position with the above plan). Let's take a quick look at the risk to reward. With the 49.25 entry, the risk will be $3.25 with a potential reward of $10.75...a 3.30 R-multiple. This is good enough to put on the trade. Remember, the 60 target is the target for the first 2/3 and the remaining portion will be trailed up to 75, which means the trade could return more, but the intial targets are good for intially determining if the trade is worthwhile.

The scenario is built, the game plan is written out, and the risk-to-reward has been qualified as worthwhile to put capital to risk for...now I've just got to put it on and manage it. Easy right? Trading can be easy when you take those steps to plan a trade and then FOLLOW YOUR PLAN.

I'll write some follow-up posts to udpate on the progress on this trade.

TLT

Swing Trade Idea: Long UTX

Here's an idea for a swing trade for tomorrow. Long UTX at 68.25, which is the high of the last hourly candle of today's trading. Why not just jump in at the closing price of 68.15? Because you want to see it open strong and hold yesterday's lows...trading up to 68.25 will be an indication strength. The profit target is $75 and a stop should be placed at 66.80. This gives the trade roughly a 4.5:1 risk to reward ratio. Here's the chart:This trade offers a very tight stop which is important for this type of trading environment. If you're wrong on a trade, you want to pull the plug quickly. Furthermore, there is quite a bit of potential for this trade if it breaks higher...this stock's sector(XLI) is particularly strong as well. If the price rises, I'll be trailing my stop with the volatility stop (using 4.5 multiple and 20 period settings) on the 1 hour chart. Note that the trade plan has a profit target set for $75, however I will continue to trail my stop past this point, unless XLI is not still in a buy mode...if that's the case, I'll take half profits at 75 and trail the other half.

The important thing to take away is the stop...a hard stop. The market has been rather shaky lately, and all it would take is a small rally in the dollar, more Dubai-like bad news, or a nasty jobs report this coming Friday and this market could tank. As always, we'll see how this one turns out. Remember, it's just a probability, never a certainty.

TLT