Let’s talk about one of the most important parts of day trading and swing trading…
You’ll often hear about two kinds of “analysis” in the stock market.
When we think of fundamental analysis, we’re talking about the business in general.
That includes sales, revenue, cash flow, debt-to-income ratio, profit margins, etc. Basically, all the stuff you would learn about in a business class.
Technical analysis is all about analyzing charts and using indicators to predict future price movements…
This is crucial for short-term trading strategies like day trading and swing trading, where quick decisions are essential.
Most traders who lose money simply don’t understand how to read a chart, identify patterns, and execute trades based on what they see.
Today, I’ll show you how to forget about fundamentals and start recognizing specific chart patterns that can help you make better decisions about when to buy (or sell) a stock…
Table of Contents
Why Use Technical Analysis?
The reason we use technical analysis so much — especially in day trading and swing trading — is simple…
Almost all of these big % gainers are disconnected from reality. The fundamentals are a joke.
And this can trip up newbie traders…
They’ll see unprofitable companies move 30%, 50%, or even 100% in a single day and think the company is actually legitimate.
But that’s a huge mistake…
All you have to do is dig into the fundamentals — actually, you don’t even have to dig — just quickly glance at the earnings, and you’ll be like:
“Where are the sales? Where are the profits? Look at these billions of dollars of debt. This company is a disaster!”
Yet the stock will still gap up 20% in pre-market and surge 200% on the day. (Welcome to the wild world of day trading.)
Now, let’s figure out why stocks make these sorts of moves…
It’s All About Market Psychology
As traders, we’re trying to recognize the psychology of the market. Charts are simply a visual representation of that collective psychology.
If you’re day trading or swing trading, you’ll see that same disconnect from fundamentals and the same chart patterns time and time again.
The charts are what’s important. It’s all about the technicals. I don’t even really care what these companies do. I just want to make money trading them (and help you do the same).
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It’s also important to think about how your trading style interacts with the chart patterns you’re trading.
Swing trading is good for part-time traders, like parents or people with day jobs.
When I’m mentoring newer traders, I always push them towards swing trading because managing the quick moves in day trades is tricker.
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But if you don’t have a boss breathing down your neck, day trading is where it’s at because you can be in and out in minutes for potentially huge gains.
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That said, no matter which works for you, both styles are heavily dependent on technical analysis because the fundamentals in the short term don’t matter.
They will eventually matter. But if you constantly focus on the fundamentals, you’ll miss nearly every big day trade — or, 99.9% of them.
FFIE’s Insane Dip and Rip Pattern
So, let’s look at a beautiful example of a morning dip and rip breakout that turned into a multi-day runner continuation play.
On May 14, Faraday Future Intelligence Electric Inc. (NASDAQ: FFIE) had a quick dip in the morning before ripping as much as 480%* on the day.
FFIE chart: May 14, 1-minute candle — courtesy of StocksToTrade.com
The beauty of these morning breakouts that trend higher and hold VWAP (Volume Weighted Average Price) is that we can target them for afternoon breakouts as well.
The most promising morning setups can hold key levels and break through resistance.
During a noon webinar, for example, the entry signal might be a break of a major resistance level identified earlier in the day.
Remember to set price alerts near key resistance points.
Once the level breaks, you want to see the stock grind higher all day, closing at its high. And if the stock gaps up again the next day, you can confirm your technical analysis.
This is exactly what happened to FFIE as the key levels broke and the chart transformed into a multi-day runner…
FFIE chart: May 14 to May 18, 5-minute candle — courtesy of StocksToTrade.com
The stock ended up surging 6,856% in four days.* (No, that’s not a typo!)
Anyone who identified this pattern could’ve made a small fortune … in less than a week.
Combining Technical Indicators
What’s great about these charts breaking out is that it’s not a coincidence when multiple technical indicators align.
For instance, a stock might fail to break out at a certain level one month, and then break the same level during a dip and rip pattern the next month.
Everyone who held through that initial failed breakout is now in the money, driving the stock higher. This is reflected on the intraday chart with a huge candle.
If you’re interested in applying these concepts, I host daily webinars at 8:30 AM and noon Eastern. Get your day started in Pre-Market Prep.
Each session focuses on the best trading opportunities, providing in-depth analysis and actionable trade setups.
This hands-on approach helps traders understand and apply technical analysis in real time — which is crucial for any trader looking to succeed in the long run.
Whether you’re a day trader or a swing trader, mastering technical analysis can significantly enhance your chances of trading success.
Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade
P.S. IRIS is one of the best tools to help you identify quality swing trade ideas in stocks that you don’t have to micromanage every second. See how our AI picks stocks and gives you full reports and trade plans here.