Recognizing Strong Uptrend in Stocks
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You should understand what kind of stocks to buy and improve when to buy them, when to hold and when to sell.
Today, we're going to be specifically talking about when to hold stock when it is in a strong uptrend. This is a passive short-term strategy. The strategy focus on holding on strength and selling on weakness.
In the video below, charts are being used to showcase the stocks in a strong uptrend.
Recognizing strength in a stock uptrend
We're going to talk about the first example. Here is a stock of Biontech. The chart you will see is as of April 16, 2021. We will talk about how to ride the strong uptrend.
What we're going to be looking for during a strong stock uptrend is when there's a down day, we want to make sure the intraday low is not lower than the previous day's intraday low.
And also, if the stock price does go lower than the previous day's low, the volume is lighter.
This signifies that it might be good to hold the stock longer as it undergoes a strong uptrend.
Okay, so let me step into the chart here, and we're going to talk about Biontech. For those who don't know about this stock, it is the vaccine maker for Covid-19 and a partner with Pfizer.
This is a weekly chart. The stock started rising early last year in 2020. You can see that from this strong breakout here, it made 150% really fast, and then it came back all the way down.
So, it is a very volatile stock, and then it forms the second base, and then now it is in the third base here. The stock’s long term uptrend is still intact.
Since that time, and you can see now that the stock breaking out again. In this base, we see what is similar to the Elliot wave, the five waves, and now it's going to break out.
So, during this uptrend, we want to look at how this stock acts. When is there weakness? So, when it drops, we want to check on a down day whether it undercuts the previous low, and it did right here. We then look at the volume down here, and you can see the red bar, which is the down day, has a lower volume than the previous day. So that's a good sign because, basically, people are less likely to sell it, when compared to the previous day that people bought. The next one is here the next down day, and you can see it here. It really didn't undercut the previous day's low right.
If you look at the number here, the previous day's low is 114.72, and here we can see it is the lowest 118.29, so it's definitely higher, and you can see from the chart as well.
As you can see, the stock’s uptrend continues really strong, especially on the last two days. Today's session is not to focus on the buy points or when to buy but if you did, let's just say the most conservative way of buying is to draw the trend line here based on the highs in the base here.
During this stock’s consolidation, you draw a line across the highest points. I say that's somewhere around here you bought. Now it's in a strong uptrend, so you want to check if there is weakness, just in case, not every time you buy on the breakout that it will work. In this case, you know, there are already two down days, and it seems to be working.
So now the question is that how far this stock will go up. It's already 16% from this previous high, so this is going up pretty fast and signify a strong uptrend.
Again, we would expect some sort of pullback here. After these two days, who knows, but when it comes, we're going to look for again the same idea. What kind of weakness is the stock going to have? We look for the down days and just follow the same rules.
Computer software security stocks
The next example we're going to look at is actually an industry group as a whole. The group consists of all the computer software security stocks. This group is showing strength in an uptrend. We want to look for when there's a down day that the intraday low does not undercut the previous day's low.
The Elliot wave here is a little bit less hard to see, but it does show the five waves again in the base. Now, we have this stock group in a strong uptrend.
This one has less power in terms of the left side of the base because you can see that if you were to draw a trend line, it is definitely a lot weaker. If you were to draw all the highs so this might be a buy point here, but it's quite low and still below the 50 days, but if you were an aggressive buyer, you probably could get in here.
You can also wait until the 50 day line, which it crosses recently, but this is the group as a whole. So, when you look at the individual stock, they may look slightly different, but anyhow we are above 50 day, but just to gauge how strong this uptrend is, again, we're going to look at the volume here on those down days and here's the first one.
So maybe here you haven't bought in yet, or maybe you have, but if you did buy in, you might be checking okay, well here's a down day. Is this uptrend going to work for this stock industry group? Let's look at the lows, and this low is 5964. The next day's low is 6001. So, it's higher and didn't undercut the previous low. Also, check the volume and it's really low. It just shows not many people are not willing to sell on that day. Now it powers up four days in a row. Now, we see two down days recently in the last three days.
You checked the low again, we have 6421, and here we have a low of 6423. So, it's two points higher than the previous day's low. This volume did come in higher, but it did not undercut the previous low. That's a good sign for this stock. If you notice, it also didn't close at the bottom of the range meaning the buyers are willing to buy, even not at the lows of the day.
That's also enough good sign. So this stock’s strong uptrend most likely will continue. We're not here to talk about buy points here, but technically it does look like it is forming the right side of the base, and if you want to buy more conservatively, it may be at the previous high here.
I'm not going to talk about the individual stocks but just to give you a sense of where they're at. We look at based on the biggest market cap, i.e. Crowdstrike. Here, you can see the base is forming, and a strong uptrend has taken hold and it is above 50 days line just like the group chart.
You could buy when the stock goes above 50 day line, or maybe it's going to build a nice handle here, and that could be a new buy point. So, depending on how aggressive you are as a buyer, you may be in, or you may not be in. But right now, if you look at this example, there are more red days. But if you just look at the most recent red day, you can see that it did come down, but the low didn't undercut.
I believe the low is 206.14. The next one is 207, so it's definitely a lot still higher, and people are reluctant to sell, as you can see based on the volume. This is a good sign here. This stock most likely will go higher.
Let’s look at a couple more stocks. They're all following the same pattern as the whole group, which is slightly above 50 days line, and they look like the volumes lower. The low here is 365.18, and here is 365.21, so just barely above it, but still, this is a good sign.
Let's look at one more stock, Okta. This one is again also slightly above 50 day line. As you can see, it shot up here in the last few days, and then it went down and didn't undercut the previous day's low, and basically, that signified a trend going upward and the same thing with the most recent day and notice where it closes, these are considered strengths.
Just do one more stock. This stock, Fortinet, has a slightly different pattern that you can see that it's been on the uptrend for a while now and seems to be accelerating. You can see the moving averages are curving upward.
Obviously, we do have a pullback here. So, depending on when you own the stock you may have been shaken out or maybe you got back in or maybe you sold some of it here. But let's look at the most recent days here. Here is a down day.
Notice how it went up to a new high, but then, it didn't undercut the previous day low as it come back down, hence the stock uptrend remained intact.
This stock is more extended in terms of buy point. These are examples to teach you about identifying weakness in a strong uptrend. So those are things to remember.
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