TRENDING STOCKS: HOW TO READ AND ANALYZE THEM
Trending stocks have very high trade volume. These stocks tend to fluctuate constantly and are brimming with opportunity. Then practice what you’ve learned with our free stock market simulation.
RECENT TOP TRENDING STOCKS
HOW TO READ STOCK TRENDS
Often when we talk about how to read stock trends, we are talking about moving averages. Its called that because it constantly changes over time. For example, a 50 day moving average will follow the closing price of a stock for 50 business days in a row and add them all together. Dividing this total by 50 gives the 50 day moving average for a given day. Using this metric, an increase or decrease from day-to-day may not change the moving average much, but over time trends become clear.
There are 3 basic types of stock trends, down, up and sideways. Downtrends are bearish, meaning that the stock price is on the way down. Uptrends are bullish, meaning that they are on the upswing. Sideways trends are neither up or nor down and the price remains roughly the same over time. It is worth nothing that these trends do not happen in a straight line but can be made clearer by plotting the moving average instead of the daily stock price.
On top of these trends there is also resistance and support. Also known as floors and ceilings. A resistance trend line follows an upward trend and leads to a price that the stock has trouble breaking through and above. On the other hand, support trend lines happen when the price of a stock is on the downturn. The price can only go so low before buyers are willing to step in and the stock has trouble falling below this amount.
HOW TO FIND TRENDING STOCKS
Increase in Trade Volume
Trending stocks are always accompanied by high trade volume. Look for stocks with the most trades per day as these are the stocks garnering the most attention. Sudden changes in volume can help identify positive or negative trends.
Trending stocks also typically have a lot of price variance. Look for stocks with the huge jumps in price on a day-to-day basis. If you can catch the price of a stock on a downswing and sell on an upswing, profit awaits you.
Following the News
Business don’t operate inside a vacuum. Pay attention to whats going on in the world. If a tech company releases a new gadget, you bet that investors are watching that stock closely as excitement builds.
TECHNICAL ANALYSIS OF STOCK TRENDS
The crux of technical analysis is that past performance indicates future performance. Meaning that a company thats doing well, will continue to do well, all things being equal. Performance is evaluated based on charts and other tools that provide insight to a company’s future.
Technical analysis cares not for the instrinsic value of a business, as this can often be subjective. Instead, it looks for patterns in historical data, such as price movements in the market. In a way, technical analysis is more interested in how to predict the future based on what data is available for the past, rather than looking at the underlying reasons for why the trend is happening.
Investors often use stock charts called bar charts to perform technical analysis on a given stock. They use other kinds of stock charts as well, but bar charts are among the most popular. Stock charts are good tools for technical analysis because they represent all relevant data with regards to price such as the highest price of the day, the lowest price of the day, the opening price and the closing price. Plot the days next to eachother and you’re ready to identify some patterns and start picking stocks.