What Stocks are Good for Swing Trading & How to Pick Your Own Personal Favorites for Day Trading:
In this article, I will be going into detail about what makes a good stock for swing trading and how to pick one that suits your needs — as while any stock can be swing traded there’s certain elements that make certain stocks better swing trading candidates compared to other stocks.
I’ll also be talking about a few of my favorite stocks to swing trade and why they’re my favorite later on in the article to give you an idea of what I mean in selecting good stocks to swing trade. If you’d like to skip directly to that section feel free to use the buttons below to skip-to the sections that most interest you.
What Makes a Stock Ideal for Swing Trading?
The biggest factor in selecting stocks for swing trading is not liquidity like with day trading, but rather how cyclical the industry or company appears to be. Stocks in more cyclical industries will typically have more clear business cycles that stretch over months or generally years and thus tend to produce relatively easy to predict swing trading opportunities.
Cyclical industries include banking (okay it used to, not now), transportation (think: Trucking, Shipping, Freights, etc), oil & gas industry, many sectors in the travel/leisure space (Casinos for example), and other such areas where the success of the company is tied closely to the overall state of its industry or economy at large.
A stock being cyclical isn’t the only thing that makes it a good stock for swing-trading — there’s many other elements that make certain stocks better for swing trading.
The other major factor that determines if a stock is a good swing-trading candidate is largely whether or not it’s a ‘growth stock’ or not. Growth companies generally are more speculative and with less fundamental backing at present both of which allow extreme highs and lows of optimism and capitulation to manifest easier.
A perfect example of this was/is Tesla. For years the stock has jolted up to ridiculously high valuations, only to crash by 30% -> 50% in a matter of weeks to a few months, only to double in price from the low just months later.
If you’re a Tesla believer, and believe it’s valuation is justified holding it long-term may be better than swing-trading, but if you believe in the company but are unsure about it’s valuation it makes for the perfect stock to swing-trade. On huge capitulation dumps where people think it’s going bankrupt you can scoop up shares for very cheap, only to sell them for a huge profit months later (most of the time) and not have to worry about the long-term prospects of the company, fundamentals, or it’s valuation, but rather just what the market sentiment is — buying when there’s blood in the streets and selling when things are back to normal or positive.
I say that because it’s important to recognize when you should bother swing trading a stock, or if you should just add it to your longer-term portfolio.
Keep in mind swing trading is about buying cheap and selling when it’s expensive – if you believe the stock/company is undervalued, or the industry as a whole — like we do with 3d printing, then you may not want to swing trade it — but instead hold it for the long-term.
What Makes a Stock Not-So-Good for Swing Trading?
While we talked about what makes a stock good for swing trading we didn’t really cover what makes a stock generally not good for swing trading yet — lets fix that.
There’s many factors here of course — but one of the best indicators is any stock that is a high-dividend yielding company. While some can be good in market crashes in particular (like what we experienced in early 2020), and in some other cases as well, generally these stocks are not very speculative at all and are held for the long-term by dividend-seekers, making their volatility low and their swing-trading potential low.
The main exception to this is if a dividend-stock has bad news and drops massively — a good example of this was in the biotech and pharmacy space a few years back. Walgreens ($WBA), CVS ($CVS), and AbbVie ($ABBV).
Despite their high dividend market sentiment turned against them, particularly after the Amazon purchase of Pill-Pack, which made many worried that these companies would lose their moat and ability to remain profitable over the coming years as Amazon’s medical businesses expanded.
The fears were clearly overblown, they were profitable, had screamingly high dividends way above 5%, and had low P/E ratios, everything looked good — months later after steep declines, they rebounded strongly, and a year or two later most of them were near all-time-highs or surpassed their old all-time-highs despite keeping and raising their dividends.
What Else Makes a Stock not a Good Swing Trading Stock?
The other factors other than what we mentioned before are less important in our opinion, but basically any stock that is not in a cyclical industry or have any news-related catalysts for price to up down or up in a strong way and turn sentiment overly bearish or bullish, are generally not good for swing trading.
There are exceptions of course, as we covered above, as truthfully any stock can present good swing trading oppertunities. It’s just ones that have high dividends, are in non-cyclical industries (think packaged foods), and are well-established have significantly less opportunities than stocks without those qualities.
The Best Stocks for Swing Trading (in our opinion):
Below we’ll go into a few of our favorite stocks to swing-trade that we keep on a watch-list waiting for the right opportunity to present itself — keep in mind any stock (as explained before) can be a good stock for swing trades, but some stocks are more likely to present good opportunities to swing-trade them. We also keep a watch out for any big movers (large increase or decrease) and high volatility stocks looking for swing-trading opportunities.
#1. | Tesla ($TSLA)
Tesla is one of our favorite stocks to swing-trade, it present multiple opportunities every year to swing-trade, and has an extremely high volatility level making it ideal for swing trading — we love jumping in Tesla when it’s beaten down or stabilizing and waiting for a small pump and then selling covered-calls (at-the-money) against it as the premiums are so high in the stock.
Tesla is something of an anomaly in general though, and our other favorite swing-trading stocks don’t present opportunities so often.
#2. | Coinbase ($COIN)
While Coinbase is a new stock we’ve already swing-traded it more than a few times and we know this will be one of our favorites as their price is strongly correlated to the price of bitcoin and the cryptocurrency markets, making this stock extremely volatile and likely to experience the same euphoric highs and terror-filled doldrums that crypto-markets are known for.
Due to the high premiums and volatility we like selling covered-calls immediately upon entering a position in Coinbase a decent amount ‘out of the money’ or waiting a bit for a small rebound in price before selling a decent OTM covered-call against our swing-trade.
#3. | Western Digital ($WDC)
This is the most commonly talked about stock when it comes to swing trading, or rather it used to be back in the day, and thus it’s one I still have on my watchlist to this day and look out for swing trading opportunities in, as it’s reliable in it’s rebounds due to the company’s cyclical nature.
The only issue with Western Digital ($WDC) when it comes to swing trading is that usually a good opportunity only presents it’s self once or twice a year, and moves tend to take multiple months to play out, making it a bit of a buying-power hog and really only a good option to stabilize a larger portfolio than stock to swing-trade with large amounts of one’s account with.
#4. | Thor Industries ($THO)
I’ve been swing-trading THO industries on and off for many years and while it’s a little less predictable (for me) than other companies we’ve mentioned above they are in a very cyclical industry and the leader in the space, so volatility is high and opportunities are quite common.
Really the whole RV & Recreational vehicle space is fantastic for swing-trading though, so rather than talk more about Thor Industries we’d like to just say Winnebago ($WGO) and others in the sector are also great for swing trading.
#5. | Virgin Galactic ($SPCE)
While I don’t believe in this company long-term as I do with many of the publicly listed space companies they are a fantastic stock for swing trading — they seem to have volatility above the level of even Tesla and frequently go down and up by over 50% in a matter of months or even weeks and moves are largely predictable based off news and expected releases in the future.
I practically always have a position in Virgin Galactic because of this — usually running either swing-trades or wheel strategies as the premium is so high and truthfully while I don’t think the company will make a ton of money I don’t see it going bankrupt or anything of the sort, so I’m not afraid of being assigned the stock or holding it and selling covered-calls against it.
Stock Swing Trading FAQ's:
Below we’ll cover some of the questions we’ve been asked or personally had in the past regarding swing-trading and selecting stocks for swing trading — if you have others that are not answered on this page feel free to use our contact page to send us an email and we’ll try to help if we can.
What stock(s) are best for a new trader or a swing trading beginner start out with?
The answer to that, of course, is it doesn’t matter what you start out with — as while swing trading can be very profitable and reliable when you’re first starting out it’s generally not very easy.
I’d argue it’s best to stick to large-cap stocks and the like rather than dabbling in small-mid cap stocks or particularly volatile stocks, but of course it entirely depends on your risk tolerance, other stock-related experience, and personal goals.
What are the best stocks to swing trade under $10?
While many people want to swing trade with small amounts of capital or with stocks that have shares that are not valued highly we’d say this is generally not a good idea — you’ll likely be too stressed out if you only have a small amount of funds to trade with and most stocks under $10 quite frankly aren’t very good for swing-trading.
If you insist on trading stocks under $10 per share we’d say if it’s possible trading internationally listed stocks in India, Singapore, Australia, or other non-US countries would be wise, as they usually have some good stocks valued at less than $10 per share.
Are Commodities Good for Swing Trading?
Yes, however as they’re not stocks their self we didn’t cover them above — however commodities (and to a lesser extent stocks that produce them) are fantastic for swing-trading, be it wood, wheat, oil, natural gas, corn, or really any of them — they’re all good.
Just be careful as most commodities-trading is different than stocks and require large amounts of capital to trade, not to mention have extra risks you need to be aware of before trading them. If you want to trade them I’d say it’s best to discuss it with a financial advisor or your broker before diving into it — it’s really risky business.