In the previous newsletter of ‘Trading the Swing’ series, we understood the importance of fundamental metrics for swing trading. We also saw the various metrics to look at for selecting the stocks for swing trading.

In today’s newsletter of ‘Trading the Swing’ series, we will see how these stocks look on the Renko chart. We will also learn the concept of swing breakouts on Renko chart and learn to participate in swing breakouts.

The concept of Swing and its breakout

Traders familiar with Renko charts knows that these charts are extraordinary in trend analysis. These diagonal plotting charts help the trader clearly understand if a stock is in an uptrend, downtrend, or a sideways trend. For this reason, the concept of Higher highs & Higher lows and Lower highs & Lower low are clearly visualized on Renko charts.

On Renko charts, a swing can be defined as a series of bullish bricks or a series of bearish bricks. When the stock is in an uptrend and is forming higher highs and higher lows, the series of bricks from one higher low to the next higher high is called a bullish swing. When a stock is in a downtrend and is forming lower highs and lower lows, the series of bricks from one lower high to the next lower low is called a bearish swing.

Just like bullish swings and bearish swings, there exist bullish swing breakout and bearish swing breakouts. A bullish swing breakout is when the price breaks the previous higher high. A bearish swing breakout is when the price breaches the previous lower low.

Swing trade set up on Renko

Because the Indian markets are inherently bullish, we will focus on bullish swing breakouts. To trade swing breakouts using a Renko chart, follow these steps:

1. Shortlist Fundamentally Strong Stocks
   Start by identifying stocks with robust fundamentals.

2. Check Relative Performance
   Assess if the stock is outperforming the broader markets.

3. Confirm the Trend with Triple Moving Average (TMA)
   Add the TMA indicator to the chart. A price trading above the TMA signals a bullish trend.

4. Enter on Bullish Swing Breakout
   Place your trade when the price makes a bullish swing breakout.

5. Set a Stop Loss
   Use the low of the swing as your stop loss.

6. Define a Target
   Set the target equal to the length of the swing prior to the breakout.

Take the chart below of BSE as an example. These are what I refer to as "clean charts," where the price rise is clearly visible. The bullish swing breakouts are highlighted with black lines. This company's improving fundamental metrics further supported the setup. Each swing breakout presented a potential trading opportunity.

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Observe the chart below of ANANDRAATHI and TATAINVEST. These stocks had shown growth in fundamentals for a few years and the stock was in a clear uptrend as they were trading above the TMA. The black lines show the bullish swing breakouts.

Swing breakouts on Renko charts are just one of the many ways to participate in swing trading. Renko trading offers a variety of setups beyond just swing breakouts. In my course, "How to Trade Renko," I delve deep into Renko charts and their techniques.

If this newsletter has sparked your curiosity about Renko charts, consider exploring the TNT One membership. It provides access to all current and upcoming courses, offering valuable insights and strategies. 👇🏻👇🏻👇🏻