How to Detect Stocks About to Rebound
When Can a Stock Rebound Be Expected?
With the stock market’s volatility in recent weeks and even months what every investor wants to know is – how do I know when the values have bottomed out and can be expected to rebound to profitable levels? Day traders live and breathe through opportunities to detect such conditions and react accordingly with buy orders timed to take advantage of rising values. The simple stock investing strategy is “buy low – sell high”. The secret is to know how to distinguish the correct timing to take financial advantage of such scenarios.
Investopedia posits that there are several guidelines that give investors valuable insight to timing of stocks bottoming out so that you can anticipate a stock rebound.
- Monitor the market sector. If you’re investments focus on the technology sector for example monitor the particular market sector activity against the market as a whole. When the market shows signs that your particular investment sector is poised for motion upward the timing may be right for buy orders.
- Activity – Stocks are basically a supply and demand commodity. When sellers are few and buyers are more plentiful the condition indicates the bottom has been reached and the trend is starting to reverse. Volume is also a barometer worth watching as stocks that are trading in higher buy volumes tell the investor that the particular stock in question is not likely to be dropping in the very near future.
- Monitor recommendations and general schools of thought. Many investors take note of investment advice or expectations by those with their finger on the pulse of markets and market sectors. Some take these pearls of wisdom to formulate the opposite of their investment strategy. Even the most savvy observers of stock activity can be wrong on any given market turn predictions. Use your own research and opinions to analyze the state of a particular sector or the market in general to guide your expectations for a stock rebound.
Of course the market does not always produce the results expected by even the experts so no one can be confident of 100% success rates in determining the exact time of stock collapses or rebounds.
What Tells You a Particular Stock Rebound is Imminent?
Some investors will historically cling to the “hunch” approach that they just have the feeling that a stock or sector is either new and bound for record-breaking heights, or is just ready to head skyward. While this may suffice for some day traders with many years’ experience to draw from most investors will utilize analysis and facts.
Check the stock’s average over time. If the moving average is reflecting a trend upwards it can generate confidence in your decision to buy. Without that indication you may want to conduct additional analysis before making that move.
Sector news. Here again watching what the market sector trend is for the stock you’re considering gives you valuable perspective. News articles can also provide guidance in what may be coming in the immediate future. This could be indications for the particular business or commodity or may be political news that you see as having an impact on your stock or sector. Examples are lawsuits against companies that could impact supply or civil unrest in countries that produce goods or components required for production (such as micro-chips for the technology sector).
Use your online broker’s analysis tools to identify stocks that may be trending up at a particular point in time. This observation enables you to further investigate the stock’s history to determine if a stock rebound is apparent. Then place the order in accordance with your risk tolerance and financial strategy. As with any day trader acquisition keep your eyes on the stock’s activity. Be prepared to cash in when the time is right.
Making the Right Move When You’re Confident in a Stock Rebound
Note that there is a significant difference in strategy between long-term investments and day trading. A stock purchased for the long term should typically not be subject to knee-jerk reactions. Such a reaction may in fact generate more potential for loss than simply maintaining your confidence that a turn-around or stock rebound will be inevitable. History puts that in perspective with the knowledge that every time the market has experienced a recession since World War II (to varying degrees) the market has subsequently recovered in a reasonably short period of time.
Day traders have a different perspective. Trades are made for the short term – usually from a few days to a few hours or even a matter of minutes. Such trades should be accompanied by due diligence and evaluation of the particular stock history and current conditions.
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Disclaimer: SureTrader Blog is not intended for U.S. persons. Stock information is not to be viewed as buy or sell recommendations.