Stock market investors are always on the lookout for new, winning commodities. To that end, experienced traders seek ways to find stocks in uptrend. These are stocks experiencing sustained, consistent periods of rising value. Investors want to capture these bullish stocks, riding their momentum to generate higher profits.
With thousands of commodities on the stock market, it’s not always easy to find stocks in uptrend. Gorilla Trades explores what constitutes a stock market uptrend, indicators to look for, tools you can use in trend analysis, and false signals to steer clear of.
What Is a Stock in Uptrend?
A stock in uptrend is a commodity showing a steady price increase over an ongoing period. One of the key technical indicators of such a stock is a pattern of increasing peaks and troughs; both the ceiling and floor of the price are consistently higher over time.
Uptrending stocks are identified by their swing high and swing low patterns. These are chart points where stock values reach temporary highs or lows before pulling back or resurging to more moderate levels. A short-term decline is nothing to worry about with a stock in a true uptrend as long as overall gains are on the rise.
The most common data points traders use to find stocks in uptrend are moving averages, which show the average price movements of commodities over a specific time frame (typically 50 or 200 days). Experienced investors use certain combinations of moving averages to find the right time to enter into promising positions.
Investors also track the speeds of price gains and trading volume to find stocks in uptrend. In these areas, sudden spikes or drops are not considered reliable indicators of a stock’s extended value. They may reflect temporary market hype or panic, which investors should be cautious of.
A Deeper Look at Technical Indicators of Uptrend Stocks
Having defined stocks in uptrend, let’s examine some of the primary technical indicators that could reveal legitimate and sustainable upward price movements.
Moving Averages
Moving average charts detail price movements over a given time frame, smoothing out the data to mitigate temporary fluctuations, sudden surges, and price drops. A moving average updates according to its time frame. A 50-day moving average chart is updated every day.
To read a moving average chart, look for sustained patterns of upward movement in average price and daily closing prices. If daily closing prices consistently outperform the moving average, it could indicate a stock in uptrend.
Investors frequently use multiple moving average charts to get a clearer view of a stock price’s trajectory. The most common moving average time frames are 50 and 200 days.
A pattern many traders look for is the “golden cross,” which emerges when a stock’s 50-day moving average crosses and exceeds its 200-day moving average. When weighed against other indicators, a golden cross may indicate a stock that’s on track for sustained price growth.
An uptrending stock doesn’t have to follow a consistently rising pattern — there will always be days when its price falls. However, that bottom-out point should be consistently higher on the moving average chart, showing its floor value steadily rising over the average.
There are two kinds of moving averages that stock traders employ. The simple moving average (SMA) is just what it sounds like: the average price movement over the established period.
The exponential moving average (EMA) is like the SMA, but it gives more weight to the most recent price movements. The EMA reflects patterns of quick price changes and potential short-term trends that cause them. If the EMA for a given stock surpasses its SMA, it may be experiencing an uptrend.
Relative Strength Index
The relative strength index (RSI) measures how quickly and greatly a stock’s recent price movements have changed. This index is a calculation of the average gain and loss over a given time — commonly, 14 days — that offers a better sense of the commodity’s momentum. The resulting figure suggests whether the stock is being underbought or undersold.
RSI values are measured using a scale of 0 to 100. Commodities with ratings of 30 or lower may be oversold, which could present a good opportunity to enter into the position. An RSI value of 70 or more indicates the opposite: an overbought stock that might be due for a correction.
Most stocks in uptrend fall between 40 and 70, although a temporary drop below 30 that quickly reverses may represent a new period of growth. In any case, RSI calculations are fairly reliable indicators of when a stock is gaining or losing traction in the marketplace.
Moving Average Convergence Divergence
Moving average convergence divergence (MACD) is another measure of a stock’s momentum that uses EMAs of a given stock. The times frames are fairly specific: 26, 12, and 9 days.
To calculate MACD, a stock’s 26-day EMA is subtracted from its 12-day EMA, resulting in a line. Then, its 9-day EMA — called the “signal line” — is laid over the graph to indicate buy and sell signals.
When the MACD line crosses the signal line, it represents a stock in an uptrend. If the MACD continues to ascend over the signal lines, it’s a sign that momentum for the stock is heating up. It might be a good time to buy into the stock before its price plateaus.
Support and Resistance Levels
Support and resistance levels are stock market signals showing traders when a stock price may change. A support level is the price point where a stock stops declining and begins an upward swing. It’s the point where buying interest is greater than the pressure to sell.
A resistance level is precisely the opposite — the price level where the stock stops rising and is due for a reversal of fortune, indicating a push to sell.
Volume Analysis
When the trading volume of a stock is on the rise, it’s a sign of substantial buying interest that could drive a stock to an uptrend. Volume spikes on an uptrending stock may confirm its upward trajectory. Lower trading volumes, conversely, could indicate interest in the stock is declining, leading to decreasing prices.
Tips to Find Stocks in Uptrend
Here are some suggestions for finding promising stock opportunities and avoiding trouble.
Combine Multiple Signals
All of the strategies and tools for finding stocks in uptrend should be used in combination. Don’t rely on a single indicator or index as a magic solution. Use as many resources and tools as you can, taking time to collect a meaningful amount of data.
Use Online Screeners
Stock screeners filter commodities according to certain metrics, such as market cap, trading volume, price movements, and analyst opinions. Many are free to use online. Look for stocks that display reliable and continued growth.
Monitor Market-Leading Stocks and Sector Trends
Find stocks that dominate their business sectors and have strong market shares. Look for indications of sustained patterns and price movements. Monitoring these factors can help you distinguish broader marketplace tendencies, including stocks on the uptrend.
Watch Out for False Breakthroughs
Resist stocks that appear to break past certain price points only to fall off quickly thereafter. Instead, combine multiple tools and strategies and get as much data as you possibly can to confirm the stock’s viability.
Find Uptrending Stocks Today
By using multiple indicators, analyzing trends, and gathering reliable data, you can identify emerging stocks with the best chance of sustained growth. With patience and mindfulness, you may find several opportunities that will boost your portfolio’s value.
Gorilla Trades: Trendsetters in Stock Analysis
At Gorilla Trades, we find the latest, most promising stocks and commodities that can boost your portfolio’s fortune sooner than you think. To learn more, sign up for our no-risk trial and get stock alerts for 30 days.
