Identifying rising stocks on the market

  • By Harrison Cole

  • October 24, 2018
  • 6:16 am BST

Being able to identify rising stocks is an essential part of trading the market. This applies to most traders, whether you’re looking to learn CFDs and stock trading or you already have years of experience behind your name. This method is based on the use of systematic approaches and a logical way of thinking surrounding the market. This method will also take different approaches depending on your trading style.

Long-term investing 

Long-term investors will want to start this process by listing the active sectors currently being traded, such as gold, banking and energy. Your next step is to look at each sector and industry’s major ETFs. A good long-term moving average to use as a reference is a 30-week moving average; this is perfect for supporting bullish movements. You should look to see if the index is above this moving average.

You will then identify on the weekly charts if there are higher highs and lows in the sector, which signals that the trend in the sector is not strong enough if these points are difficult to identify.

Volatility within the sector is the next key variable as the higher the volatility, the larger the expected rise. High volatility will create a great opportunity for you to buy and hold a stock in the long run. You can do this by making use of the ATR (average true range) indicator at its 14-period to conduct your analysis.

The last variable that indicates the potential of a stock is volume. Volume should increase during each high and decrease during each pullback, as this confirms a strong bullish trend.

Choosing a stock and buying on the pullbacks

Your analysis of the best 10 sectors should provide a clear indication of the stocks with the most potential, which can be seen when a chart continues to rise. Your next step is to analyze the chosen best stocks and conduct a further assessment to determine which is the best and strongest choice. Once you have done this, you can set your profit target for this stock and find the best opportunity to buy.

The pullback is undoubtedly the best time to buy. A clear support line will guide your trades, as a pullback to this support line – or even a slight penetration of the line – will give you the best chance to buy.

In terms of selling, the best time would be the previous swing high. When the stock breaks through the level, you should sell either at the top of the trend channel or at the supply line.

Short-term trading

Short-term traders, or day traders, should also have a set list of trading tips when it comes to the buying and selling of stocks. First, you should focus on the current rising stocks rather than those that will be rising for the long run. The key is to keep the process simple and use basic tools of analysis, such as a market scanner. This will reveal the rising stocks of the moment, but you should always take volume into consideration when reviewing what the scanner shows you. This will afford you the freedom of easy access when entering and exiting a position, which is essential for day trading.

There are two ways to trade the stock once you have identified it. The first option is to buy when the stock has a clear pullback at the support line when using an intraday chart of 5 to 30 minutes. Your second option is to buy the stock when it breaks its daily high and a slight pullback occurs.

Additional details to keep in mind

Penny stocks on the rise may hold potential, but it is important to remember that these don’t always lead to long-term success. It is also important to be wary of stocks that have been predicted to rise without first conducting your own research and careful analysis. You should wait for the stock to show a steady rise before buying into it. Shorting rising stocks is not recommended because anything can happen.