Do you know how to predict when a stock will go up? When day trading, you don’t profit from fundamental analysis but from buying and selling. You need to know what you will do when the market does what it will do. Unfortunately, the market doesn’t shout out when stock will surge in price.
If that were the case, we’d all be rich. But what it does do is 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.
The whispers below matter if you want to catch a stock before it soars to the top.
Table of Contents
- Steps on 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?
Steps on How to Predict When a Stock Will Go Up
As a retail day trader, you profit from volatility in the market. Similarly, you will not make any money if the markets are flat or trending sideways.
In circumstances like this, only 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 have 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 by $1 or $2 daily. For these reasons, day traders dislike trading high-float stocks. Hence, when wondering how to predict when a stock will go up fast, don’t trade mega-cap stocks.
2. 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 is that low-float stocks can be volatile and move quickly. They are mostly under $10 because many companies are in their early development stages and not making a profit.
They issue more shares on the public market to grow and raise more money. 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 and are extremely volatile, moving 10%, 20%, 100%, or even 1,000% daily.
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 lose your account. And perhaps you can realize those 100% gains!
Finding 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 won’t work—the same with the baking soda.
Likewise, just looking for stocks with low float is not enough. You will need a few other ingredients, such as a high relative volume, a volume surge, and confirmation from a few indicators of your choosing.
Before I forget, you won’t be able to find these stocks unless you are using a good scanner. At Bullish Bears, we use Trade Ideas, which are fantastic and available at a considerable discount.
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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 is one of them. Volume is extremely important to trading. Have you tried to trade a stock without it? As the saying says, a watched pot never boils. And the same could also be said about price movement. It would be best if you had buyers and sellers in large quantities.
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 a high volume is considered stronger and more relevant than a similar move with a 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, you must also examine 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 a warning of a potential reversal.
2. 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 the stock price, whereas VWAP considers price and volume. Thus, it lets you know if the buyers or the sellers control the price.
One way to predict when a stock will go up is confirmation of a candlestick close above VWAP. Many 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 handy. Moving averages, RSI, and MACD can be quite useful.
1. 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 evaluate how secure the current price is and 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. An 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.
2. Moving Averages
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 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, 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 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 exceeds the 26-day EMA, you get a +MACD value.
This means that upside momentum is increasing and predicts that a stock will increase in price.
Final Thoughts: How to Predict When a Stock Will Go Up
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.
As 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.