Do you know how to predict when a stock will go up? When day trading, you don’t profit from fundamental analysis; you profit from buying and selling. You need to know what you will do when the market does what it is going to do. Unfortunately, the market doesn’t shout out when stock is going to surge in price.
If that were the case, we’d all be rich. But what it does do it talk in whispers. Luckily, if you learn to quiet the noise, you will learn how to predict when a stock will go up in price.
Below, in my opinion, are the whispers that matter if you want to catch a stock before it soars to the top.
Table of Contents
- How to Predict When a Stock Will Go Up
- How Do You Predict the Stock Price Movement?
- How Do You Predict if a Stock Will Go up or Down?
How to Predict When a Stock Will Go Up
As a retail day trader, you profit from volatility in the market. Similarity, if the markets are flat or trending sideways, you will not make any money.
In circumstances like this, only the high-frequency traders make money. Therefore, you need to find stocks that will make quick moves to the upside in a relatively predictable manner.
Typically, the stocks that move fast are those with a very low float. By definition, “float” means the number of shares available for trading.
For example, as of October 2020, Apple had 17.09 billion shares in the market to buy and sell. Because of this large number, we consider Apple a “mega cap” stock.
Moreover, these “mega cap” stocks generally don’t move much during the day because you’d need substantial volume and deep pockets to trade.
As a result, on average, Apple shares might change by only one or two dollars a day. Likewise, if you’re trying to predict when Apple stock will go in price, don’t bother.
Apple shares are not very volatile; they might only vary $1 or $2 a day. For these reasons, day traders don’t like to trading high float stocks. Hence, when wondering how to predict when a stock will go up fast, don’t trade mega-cap stocks.
The Appeal of Low Float Stocks
On the other hand, some stocks have a very low float. For example, Benitec Biopharma Inc. (ticker: BNTC) has only a .77-million-share float.
What this means is that the supply of Benitect shares is low. We call these “small-cap” or “micro-cap” stocks. More importantly, a large “demand” or buy order can quickly move the stock price.
The main point here is that low float stocks can be volatile and move very fast. For the most part, they are under $10 because many are companies in their early development stages and not turning a profit.
In an attempt to grow and raise more money, they issue more shares on the public market. Slowly but surely, they hope to become mega-cap stocks.
Day traders love low float stocks and for a good reason. Many are priced under $10 are are extremely volatile, moving 10%, 20%, 100% or even 1,000% each day.
No, I’m not kidding you! But, I do need to warn you of something. As a new trader, trading low float stocks can be difficult but not impossible.
Because they move quickly, it can be hard to manage your risk. Luckily, Bullish Bears will give you the strategies to manage risk, so you don’t blow up your account. And perhaps, you can realize those 100% gains!
How to Find Low Float Stocks That Are Moving
Just like baking a cake, you need multiple ingredients if you want it to turn out. Forget the sugar; it’s not going to work—the same with the baking soda.
Likewise, just looking for stocks with low float is not enough. You’re going to need a few other ingredients such as a high relative volume, a volume surge and confirmation from a select few indicators of your choosing.
Before I forget, you’re not going to be able to find these stocks unless you are using a good scanner. At Bullish Bears, we use Trade Ideas, its fantastic and available at a considerable discount.
How Do You Predict the Stock Price Movement?
When you’re learning how to predict when a stock will go up, there are some things you need to consider. Volume being one of them. Volume is extremely important to trading. Have you tried to trade a stock without it? Like the saying says, a watched pot never boils. And the same could also be said about price movement. You need buyers and sellers in large quantities.
I am going to start with one of the most essential indicators there is: volume. Having said that, we use volume to confirm trends, breakouts, and overall chart patterns (i.e. head and shoulders, flags, etc.).
Likewise, if you’re wondering how to predict when a stock will go up, look for a volume surge in plain and simple terms.
Beyond that, any price movement with high volume is considered a stronger, more relevant move than a similar move with weak volume. For momentum traders who trade breakouts, a volume surge is mandatory to confirm that it’s, in fact, a breakout!
Volume Confirms Breakouts
More importantly, volume precedes price. A surge in volume is mandatory to confirm a breakout. If there’s no volume, it is not a breakout; it could be just a false rally.
Thus, if you’re looking at a significant price movement, it’s critical you also example the volume to see whether it tells the same story.
An example would be a stock surging in price; you jump in and buy. Be wary, though; if there’s a decrease in volume, it signals an end of the trend and a lack of interest. It’s warning of a potential reversal.
Relative Volume (RVOL)
RVOL, displayed as a ratio, compares the current volume to the normal volume for the same time of day. For example, if a stock is trading five times its normal volume, it would have a relative volume display of five.
In the day trading world, we like to see RVOL at two or higher with a positive catalyst (i.e. positive news on a drug trial). A high RVOL coupled with a low float is a stock with the potential to make you money! Almost every winner has a high relative volume that day compared to its average volume.
Next to volume, VWAP or the Volume Weighted Average Price is an important day trading technical indicator. I know of some traders who only use VWAP and volume to confirm their entry and exit points!
Other moving averages are calculated using only on the stock price, whereas VWAP considers both price and volume. Thus it lets you know if the buyers or the sellers are in control of the price action.
One way to predict when a stock will go up is confirmation of a candlestick close above VWAP. A lot of traders will take a small position entry on the VWAP in anticipation of a bounce.
Some platforms such as Trade Ideas even have built-in VWAP crossover scanners; this shows the weight this indicator throws around.
How Do You Predict if a Stock Will Go up or Down?
If you want to know how to predict when a stock will go up, you need to be prepared for when the stock will come down. You know what they say. What goes up must come down. And visa versa. That’s why technical analysis comes in really handy. Moving averages, RSI and MACD can be quite useful
Using RSI to Predict When a Stock Will Go Up
The Relative Strength Index, or RSI for short, is one of the momentum indicators. This indicator is based on past volatility and performance and uses a numerical score between 1-100.
The RSI score will provide you with an evaluation of how secure the current price is, help you determine if the market is overbought or oversold, and range-bound or flat.
More importantly, RSI will tell us if a reversal is imminent. A RSI value <30% means that the stock is oversold and is trading near the bottom of its high-low range.
At this point, get ready for a reversal in the up direction. So if you’re wondering how to predict when a stock will go up, look at the RSI value.
Moving Averages are important because they can help us confirm or identify a trend. I recommend trying multiple MA lines with differentiating time frames on your chart.
I use the 9 and 200 MA as it helps me identify more robust trends and possible reversals. There are a few ways how to predict when a stock will go up using moving averages.
Firstly, the farther the price is away from the moving average, the weaker the trend. A weak trend means a potential reversal is on the horizon.
Armed with this information and confirmation from the RSI indicator, you’re well on your way to executing a winning trade.
Secondly, you can utilize two moving averages to confirm a reversal. After a downtrend, for example, if the nine-day MA crosses above the 50 day MA, then the bearish trend may be reversing, signaling the start of a bullish trend.
Another popular momentum indicator is the moving average convergence divergence (MACD) oscillator. MACD shows the relationship between two moving averages and it functions as a buy and sell trigger.
Even though it is up to the trader’s discretion, you typically use the 12-day and 26-day exponential moving averages (EMAs). When the 12-day EMA is greater than the 26-day EMA, you get a +MACD value.
This means that upside momentum is increasing and a predictor that a stock will go up in price.
When trying to figure out how to predict when a stock will go up in price, you have many indicators you can use. Unfortunately, this can be confusing and noisy for new traders.
Like I mentioned above, the market talks in whispers. What you need to do is quiet the noise and listen.
With Bullish Bears, we will help you to simplify things. All you need to be a success is to master a few indicators and your trading strategy.
Join us today, and we will show you how. With deep discounts on your membership, you’ve got nothing to lose.