Swing trading does not need to be complicated. Over time, I have narrowed my process down to just three high-probability setups that I trade most often. These setups repeat across many quality stocks and work well when the overall market is choppy or selective.
In this post, I want to walk through those three setups using real examples so you can understand how to spot them and how to think about risk.
The Three Setups I Focus On
The three setups I consistently look for are:
- Reversal Setup
- Flag Breakout Setup
- Anticipation Setup
Each one has a different purpose, but all are designed to capture short to medium-term price moves, usually lasting a few days.
1. Reversal Setup: Catching the Turn Early
A reversal setup appears when a stock has been in a steady downtrend and starts to show signs that selling pressure is weakening.
Example: Oracle
On Oracle’s daily chart, the stock had been trending down for weeks, printing lower highs and lower lows. Around late November, the stock retraced into a lower high and then held a higher low. That alone told us selling momentum was slowing.
The real signal came when a bullish candle followed a candle that should have continued lower but didn’t. That change in behavior matters more than indicators.
Once price broke above the short-term trendline and held it the next day, the reversal was confirmed. From there, Oracle continued higher for several sessions.
This is a classic example of letting price tell you when the trend is changing.
2. Flag Breakout Setup: Trading Continuation
Flag setups happen after a stock has already made a strong move. Instead of pulling back sharply, price consolidates in a tight range for a few days before breaking out again.
Example: Boeing
Boeing moved higher, paused for about three days, and formed a tight consolidation. That pause is healthy. When price broke out of that range, it confirmed continuation of the trend.
Flag breakouts often produce quick, clean moves over the next three to four days, making them some of the most reliable swing setups when the market cooperates.
3. Anticipation Setup: Preparing Before the Crowd
Anticipation setups are about preparation, not prediction. You are watching for a possible move and waiting for confirmation.
Example: AMD
AMD rallied for several days, pulled back briefly, and then printed a bullish inverted hammer. If the stock wanted to continue lower, it should have done so immediately. Instead, price held firm.
This is where anticipation comes in. You can either:
- Take a small starter position, or
- Set alerts and wait for the trendline break
Once price breaks out, the anticipation setup turns into a trade with defined risk and reward.
Managing Risk the Right Way
Instead of focusing on what a stock should do, focus on what it should not do.
For example, after a breakout:
- The next candle should not break below the breakout candle
- If it does, exit early with a small loss
When price moves in your favor, trail your stop and protect gains. This approach allows small losses and lets winners run.
Final Thoughts
These three setups work across many stocks and market conditions. You don’t need highly volatile names or constant trading. A few quality trades per week, managed well, can compound nicely over time.
For full chart walkthroughs and real-time examples, you can follow along here:
YouTube Channel: https://www.youtube.com/@ApplTree360-s6j3t/videos
Blog Website: https://appletree360.com/
Discover more from AppleTree360
Subscribe to get the latest posts sent to your email.
