Swing trade picks rely heavily on technical analysis. Technical analysis can be summed up as knowing the psychology between price and volume. Since the market is driven by human emotions such as fear and greed, stocks will trade in patterns similar to those found in the past. These patterns can signal that it is time to buy or time to sell a stock. Taking advantage of these signals and the expected swing in prices is known as swing trading.

Some of the Common Chart Patterns

The most popular chart pattern found is the cup with handle pattern. This is a pattern where the price action of a stock resembles the profile of a cup and handle. You can see these types of patterns on either a weekly or daily bar chart. The psychology behind the cup with handle pattern is simple; it wears out weak holders until only buyers are left. A stock will peak and fall from its high forming the left side of the "cup." After the decline the stock will trade sideways for a given period of time, forming the bottom of the "cup." The stock eventually starts to pick up in price until it approaches its old high, the right side of the "cup."

The handle is the important part of a "cup with handle" pattern as it is where the final shake-out of weak holders occurs. As investors see the price move up to the old high they fear that the stock will peak again so they sell their investment. Ideally the price moves lower as volume thins out before finally trading through the handle on explosive trade. This signals a buy for the swing trader as the stock has made its way through the weak holders and only committed buyers are left to drive the stock higher.

There are other chart patterns that signal buys for the swing trader. The double bottom pattern looks like a "W" on the chart. The right leg shakes out the weak holders and the buy sign is when the stock clears the middle peak of the "W." The flat base is just like it sounds, flat. The flat base wears out weak holders by trading in a tight range for an extended period of time. Weak holders lose patience with the stock and clear out until only buyers are left to drive the price higher. Recognizing these patterns is a start to becoming a swing trader and finding swing trading picks.