Master 5 Swing Trading Entry Strategies to Catch Market Leaders | Ft‪‬ Himanshu Sharma | EP-74

Summary

The discussion focuses on finding market-leading stocks and entering them through different setups, especially in choppy markets. Guest Himanshu Sharma says broad-market conditions are largely outside a trader’s control, so traders should focus on improving stock selection, timing entries, and controlling risk. He argues that strong stocks can continue to perform even when the index is sideways, particularly when earnings or another growth catalyst attracts institutional buying.

Sharma describes leadership stocks as having strong relative strength (RS), a smooth prior uptrend, and relatively shallow pullbacks—often toward the 21- or 50-day exponential moving average (EMA)—rather than deep corrections. He cautions against chasing stocks after they have already made several large advances. He also says a high price-to-earnings (P/E) ratio alone does not establish that a stock is expensive: valuation should be considered alongside growth, while recognizing that a slowdown in growth can prompt a sharp repricing.

Stock-Selection Framework

• Start with relative strength: Review past winners and look for stocks outperforming their benchmark and peers. Sharma cites William O’Neil’s observation that past winners had an average RS rating of 87.
• Use a screening list: His example screen uses:
  • Price above the 200-day EMA
  • RS rating of 80–100
  • Average daily turnover above ₹10 crore
  • Market capitalization above ₹500 crore
  • Share price above ₹10
• Sharma says this screen produced about 252 stocks in the example. Manually checking earnings and catalysts could reduce the list to 50–60. Traders with larger portfolios might use a higher market-cap floor, such as ₹1,000–1,500 crore or, for some fund managers, ₹3,000 crore.
• Check the industry group: Prefer stocks in themes or sectors where several constituents are strengthening. Sharma uses this as a bottom-up way to identify where money may be moving.
• Verify the business and catalyst: His research sequence is to review the company website and products, examine the balance sheet, profit and loss statement, and cash flow, then review presentations and earnings-call material for growth plans and catalysts.
• Assess the chart and market context: Look for a smooth prior up-leg, strong RS, price holding up during market weakness, and a base or consolidation near the 21- or 50-day EMA. Sharma says leaders may remain on an RS list for 1–1.5 years.

Sharma says sector themes may remain strong for roughly 1–1.5 years, but can fade as company growth slows. He gives examples of themes that had previously led the market, including pharma, IT, chemicals, railways, defence, solar, and AI/data centres.

Five Entry Methods

Sharma presents five ways to enter a stock, stressing that they should be applied to a strong candidate rather than used indiscriminately.

1. Standard breakout: Buy when price breaks above a significant high, such as an all-time high, 52-week high, or base high.
2. Pivot breakout: Buy as price clears a tight consolidation within a broader uptrend. Sharma says this can offer an earlier entry and a closer risk reference than waiting for a higher breakout.
3. Pullback entry: After an established uptrend, consider entry when price pulls toward the 21- or 50-day EMA and turns back up. He says 50-day EMA pullbacks have been useful in the choppy conditions discussed.
4. Shakeout entry: If price briefly breaks support or a moving average but recovers above it within a few days, consider an entry as it reclaims the level. Sharma describes this as a possible sign that weaker holders have been shaken out.
5. Gap-up entry: A gap may reflect news or a catalyst and does not necessarily have to fill. Sharma says he may use the gap low as the risk reference, but avoids chasing very large gaps. He mentions not taking a gap-up entry when the move is around 9–12% and the stop would be too far away.

Sharma distinguishes a brief breakout retreat followed by recovery (a “squat,” in his terminology) from a failed breakout that falls decisively back through the base. He says false breakouts can become more frequent near a market top.

Risk Management and Position Sizing

• Stop placement: Two approaches discussed are a tight stop near the breakout-day low and a wider stop below the consolidation or base low. Sharma says the tight stop can be hit more often in choppy markets; a base-low stop gives the trade more room but increases the loss if it fails.
• Position-sizing formula: For a target of 1% account risk, Sharma gives the following formula:

Position size as a percentage of capital = 100 ÷ stop-loss percentage

- With a **4% stop**, a **25%** portfolio position risks 1% of capital. On ₹10 lakh, that is a ₹2.5 lakh position and a ₹10,000 loss if the stop is hit.
- A **5% stop** corresponds to a 20% position for the same 1% risk.
- With a **2% day-low stop**, the formula gives a 50% position for 1% risk, but Sharma says traders may instead use a smaller position—for example, 12.5% of capital for 0.25% risk.

• Sharma suggests less-experienced or less-comfortable traders may reduce risk to 0.2–0.25% per trade rather than taking 1%. He characterizes the market as not especially suitable for aggressive risk-taking.
• Entry execution: Traders can enter immediately as a pivot is crossed, wait for more confirmation, or split the intended position—taking part on confirmation and adding later. Sharma notes the trade-off between earlier entry and stronger confirmation.
• Managing winners: Sharma says he may take some profit after a stock rises around 20–25% and trail the remaining position using the 21-day EMA. In one example, he describes locking 30% after a 20% gain; the precise meaning of “lock” is not fully clear in the subtitles.
• Avoid FOMO: If the initial breakout is missed, Sharma says a leader may offer later pullback, shakeout, pivot, or gap-up entries. He cautions against entering after a stock has already made multiple large legs solely in the hope of capturing the same return as earlier buyers.

Examples and Assets Mentioned

Stocks and companies: Sterlite Technologies; HFCL; MTAR; TD Power Systems; Laurus Labs; Shilpa Medicare; Sansera Engineering; Lumentum; Corning; Sky Gold; Shanti Gold; PC Jeweller; Tribhovandas Bhimji Zaveri (referred to as Tribhovandas Zaveri); PNGS Reva; DP Abhushan; Senco; Azad Engineering; Sigma Advanced; Rossell Techsys; Dynamatic Technologies; Unimech Aerospace; Fineotex Chemical; RR Kabel; Yasho Industries; Honasa; Aether Industries; Black Box; E2E; JG Chemicals; JTL Industries; Aarti Pharmalabs; Meesho; Moderna; D-Mart; Trent; Varun Beverages; Tata Elxsi; KPIT Tech; Alkyl Amines; Balaji Amines; Tanla Platforms; Deepak Nitrite; BSE; and V2.

Sectors and themes: AI and data centres, optical fibre, pharma/CDMO and oncology, auto ancillaries, jewellery and gold, aerospace and defence, chemicals, cables, power, and semiconductors.

Markets and instruments: NSE-listed shares, market indices including Nifty, and moving averages. No ETFs, bonds, or cryptocurrencies are discussed.

Key Figures and Claims Cited

• Sharma describes the preceding two years as choppy, with the index delivering little overall return while some individual stocks advanced substantially.
• He defines a bear-market warning condition as less than 20% of stocks above their 200-day moving average.
• Laurus Labs is described as rising about 80–90% since April; the year is unclear in the subtitles.
• Sterlite Technologies is described as having a roughly 1,900% sales jump in a cited period and as having risen from a market capitalization of about ₹5,000–6,000 crore to around ₹50,000 crore. These figures are presented in the conversation and may be affected by subtitle errors.
• Sharma says Shilpa Medicare and Laurus Labs each roughly doubled in the examples discussed.
• He cites an approximately 20% upper-circuit limit when explaining why some gap-ups may be difficult to trade.

Disclosures

No explicit “not financial advice” disclaimer is stated in the subtitles. The guest presents his own methods and observations. He cautions that entry styles, stop placement, and risk tolerance differ among traders, and that his approach should not simply be copied without considering individual risk.

Presenters and Sources

Presenters: Vijay Thakkar (host) and Himanshu Sharma (guest, identified as “TheChartist26” on X/Twitter).

Books and authors cited in the discussion: William O’Neil, How to Make Money in Stocks; Jesse Livermore, How to Trade in Stocks and Reminiscences of a Stock Operator; Peter Lynch, One Up on Wall Street; Dan Zanger; Mark Minervini, Trade Like a Stock Market Wizard and Momentum Masters; Bernard Baruch, My Own Story; and William Jiler, How Charts Can Help You in the Stock Market.