3 Telltale Signs A Stock’s Price Is About To Go Up

Wouldn’t it be great if you could look at a stock chart and know for sure that the price was about to go up?

Of course, that’s every trader’s dream. It’s what every newbie and experienced trader alike are on the hunt for every single day. It’s also one of the most difficult things to do.

And while it’s impossible to predict what a stock is going to do 100% of the time, there are 3 telltale signs anyone can exploit to increase the odds dramatically of knowing when this is about to happen.

In this short article, you’re going to learn these 3 signs, along with 3 specific techniques you can copy to help you predict when a stock’s price is about to rise.

To begin, one of the most difficult things for any trader is to try and determine when a particular stock has ‘bottomed’, or reached its low point and may be headed for an upward trend.

Of course, everyone wants to buy low and sell high, but if you consider that a stock’s price can be influenced by many variables, such as macroeconomic, political and economic events, being certain that a stock has bottomed is an intimidating task.

Unfortunately, there is not a realistic expectation that you are going to find a way to know for sure what the price will do in the future. Always keep in mind that “expect” is the key word here; no one knows for sure if a stock will move higher.

You need to fight through all the information, noise, hot tips from media personalities, or friends (who themselves are just guessing).

Without discipline, risk management, sound trading methods, and some useful trading tools, you may as well be gambling in a casino.

First, you have to determine your trading time frame: short-term (20 days), intermediate-term (18 weeks) or long-term (18 months).

Depending on your time frame, you can use the following charts:

  • Short-term – Daily
  • Intermediate-term – Weekly
  • Long-term – Monthly

The first requirement, in reviewing the charts, is that the stock must already be in an uptrend; trying to pick the bottom of a downtrend is foolhardy. This requirement, paired with using simple techniques, which I’ll get into below, can help you identify stocks that are very likely to move higher.

With that being said, there are some very useful tools that you can place on your charts to have a reasonable expectation that the price should continue to move higher.

Many traders make their trading decisions based on subjective information, whether it’s from them guessing or having a “gut” feeling or they are listening to what someone else thinks may happen.

One of the most important things you can do as a trader is to develop a process of objective criteria in your trading. This objective criteria gives you a definitive way to say something is happening on the chart, without having to guess.

As a trader, if you can create a step-by-step process of evaluating your charts, you can begin to gain the confidence and consistency you need to make your trades.

So what are some of the more objective things you can look at to decide if a stock is going to move up in the future?

Here are three things that you may want to start using to help identify if the price wants to move up:

Telltale Sign #1: Price Action

This might be the most simple, yet effective, way to identify if price is going to move up. Price action is the key for all other indicators. If there were no price action, the other indicators would be useless.

The first thing you can look at is to make sure that price is making higher highs and higher lows. The stock will not rise if this doesn’t happen.

Each bar has a bar-high, as well as a bar-low. As these highs are on the increase, you can see price action rising.

One way to confirm that the price is beginning to trend up is to look for an initial move in the price action, from making lower lows and highs, to making higher highs and lows.

For example, once the price action has put in 1 higher swing high and 1 higher swing low, you can be fairly confident that the new trend is forming.

Take a look at this chart below:

20150519_inside-01

In this example, you can see the red and green circles, which outline the highs and the lows, both moving higher. When we see this type of price action, we can feel comfortable in stating that the price should continue to move higher.

In addition, if the price changes from this pattern, to now making lower highs or lows, you can know that the direction is beginning to change.

Copy This Technique:

An excellent buy point occurs in an uptrend when the market retraces 50% of a previous up move. To determine that level, you take the most recent high and add it to a previous higher low and divide by 2. That will give you the 50% retracement level. Strong support often occurs at the 50% retracement level where the uptrend then resumes.

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Telltale Sign #2: Moving Averages

This is another simple tool that you can use to help you know if price is expected to rise. Moving averages come in a variety of types: simple, exponential, and weighted, to name a few. In the example below, the simple moving average is being used. This will give you an idea if the price is trending up or not.

A simple moving average can be calculated by using the open, high, low or closed price. In this example, we will use the closed prices.

So, in order to calculate the 40-period moving average, you would add together the closing prices of the past 40 bars and then divide by 40. This creates the average price over that time period.

It shows you if those prices are increasing or not. While this does not guarantee that the price will go up, it is a good indication that the market wants the price to stay strong.

Take a look how this chart shows the red, 40-period, simple moving average moving higher:

20150519_inside-02

This indicates that the price is strong and is likely to continue rising, at least in the near future. Also notice that the price is above the moving average. This is added confirmation that the trend is strong.

Once the price moves below the moving average it may be indicating that the trend is weakening and you need to look for something else that is going to continue moving higher.

Copy This Technique:

When the 40 simple moving average is moving higher, an ideal buy point would occur when the market retraces to the 40 simple moving average line and then closes higher than the previous bar’s high indicating that the stock will probably resume its uptrend.

Telltale Sign #3: Envelope Channels

This is a tool that can help you better visualize the direction the price wants to move.

Envelope Channels are percentage-based envelopes, set above and below a moving average. The moving average, which forms the base for this indicator, can be a simple, exponential, or front-weighted moving average.

The top and bottom channel lines are plotted the same percentage above or below the moving average. This creates parallel bands that follow price action.

With a moving average as the base, Moving Average Envelope Channels can be used as a trend following indicator.

If the channel that the envelope forms is moving upward, then the price is likely to continue to move it the bullish direction.

Take a look at the chart below to see how an envelope looks on the chart:

20150519_inside-03

In this example, we have it set using the 50-moving average with a standard deviation of 10. You can make adjustments to these numbers, just be careful that you don’t customize it too much to make it look like you want.

This gives you a good visualization of the direction the price wants to move. An upward moving channel will represent a bullish moving stock.

As this channel changes direction, you need to be careful about continuing in a bullish trade.

Copy This Technique:

A high probability place to buy into an upward trending envelope channel is when the market falls back into the envelope to the center point, which is the moving average that the envelope is based upon.

Next Steps…

So there you have it! Whether you use price action, moving averages, or envelope channels, the key is to have an objective tool that will keep you from guessing what is happening. You should be able to look at the chart and have instant confirmation that the price action is strong and should continue to rise or not.

If you can trade when the price is likely to rise, then you are putting yourself in the best position to profit from that trade. Test out these telltale signs for yourself, copy and implement the techniques, and see how they can help improve your trading.

However, there’s a caveat to all this.

Even if you master these telltale signs and get really good at predicting when a stock’s price is about to go up, chances are that there’s something you’ve been doing in your trading that’s been unintentionally sabotaging your chances of having the potential to build real wealth in your portfolio.

It’s something that makes it almost impossible to consistently get ahead in the markets. I call these things the “Profit Killers”, and I’ve identified 7 of them.

But I also developed a free analysis tool that can pinpoint what your #1 Profit Killer is in about 15 seconds. Once you discover what it is, then it’s easy to eliminate it. And once you do that, your chances of winning more trades than you lose can skyrocket, almost immediately.

Go here to discover your #1 Profit Killer and learn how to eliminate it forever.

Call and Put Options

Call and put options are two important trading concepts to understand and leverage when trading options. If you’ve previously tried to learn about puts and calls but were left confused, here we clear up that confusion, provide memorable examples, and leave you with a solid understanding of these trading techniques.

Do you want to have the potential to enjoy double or even triple-digit returns on a per-trade basis, with less risk than how most people trade?

It’s possible when you know the safe way to trade options. And if you’re serious about making as much money as possible with your portfolio, then you really need to be trading options.

And if you’re not already doing that, it’s probably because you either don’t understand how to do it properly, or you think it’s too risky.

Suzie & SammySo instead, you probably just continue to do what you’ve always done, and just trade a stock or exchange-traded fund directly. That’s what most people do. But most people also are net losers when they trade the markets.

Plus, trading a stock directly can eat up a healthy chunk of your portfolio pretty quickly. So, you end up having too much of your money exposed to too much risk.

But if you understand just two simple options trading concepts, you’ll be able to enjoy the tremendous leverage that options trading offers. It’s a way to tap into the huge profit potential of the stock market without having to come up with a lot of money to purchase shares of a company’s stock.

You simply put down a tiny deposit to trade those same number of shares. And because you risk nothing more than the small deposit amount, your risk actually plummets. This is why options trading is much less risky than trading a stock directly.

For example, instead of paying $56,000 for 100 shares of Google stock, you can control the same amount for as little as $1,900. Instead of paying $13,000 for 100 shares of Apple stock, you can control the same amount for as little as $950. Or, instead of paying $8,100 for 100 shares of Facebook stock, you can control the same amount for as little as $330.

The two simple options trading concepts you need to learn are call options, and put options. Of course, there’s a lot more to options trading than that, but many very successful options traders use nothing else but those two simple techniques.

And if you’ve tried to understand call and put options in the past, but are still confused, you don’t have to worry. That’s because you’re about to learn how these concepts work in a fun and simple way – something that you’re not likely to forget.

How? Instead of having some trading geek with a PhD try to explain it to you with confusing charts and graphs, you’re going to learn about from two cartoon characters, Suzie & Sammy.

How Call Options Work (or, How To Control A $500,000 House With Just $5,000)

To demonstrate how call options work, meet Suzie & Sammy.

How To Control A $500,000 House With Just $5,000Suzie is selling her house for $500,000 in a neighborhood that has a nearby parcel of land that is for sale as well. There are two parties interested in the land.

Peter plans to develop the land into a beautiful park and bird sanctuary, and Harry plans to build a low-cost housing development.

Now Sammy comes along and is interested in buying Suzie’s house for a cash deal, but he has a problem – he won’t have the cash available for three months. So he’s of course worried that the house will be sold to someone else in the meantime.

How To Control A $500,000 House With Just $5,000So he decides to offer Suzie $5,000 (the option premium) right now if she’ll take the house off the market and give him the option (a “call option”) to buy the house for $500,000 (the “strike price”) anytime within the next three months (the “expiration date”).

If he does not elect to buy the house, Suzie keeps the $5,000 premium and Sammy walks away from the deal. If he does elect to buy the house (or “exercises the option”), Suzie still gets to keep the $5,000 and he pays Suzie $500,000 for the house.

Now three things could happen in this story.

How To Control A $500,000 House With Just $5,000 - Scenario 1In Scenario 1, Peter buys the nearby parcel of land to build the beautiful park and bird sanctuary. This, of course, will increase the value of Suzie’s home to say $600,000. In which case, Sammy will be very happy to exercise his option to buy the house for $500,000.

How To Control A $500,000 House With Just $5,000 - Scenario 2In Scenario 2, Harry buys the nearby parcel of land to build the low-cost housing development. This, of course, will decrease the value of Suzie’s home to say $400,000. In which case Sammy will not exercise his option to buy at $500,000 and just walk away from the deal, having lost only $5,000.

How To Control A $500,000 House With Just $5,000 - Scenario 3Then there’s Scenario 3, where neither party buys the nearby parcel of land. Suzie’s house is still worth $500,000 and Sammy can elect to exercise his option to buy the house for $500,000 or not and simply walk away from the deal, losing only $5,000.

How To Control A $500,000 House With Just $5,000

In effect, Sammy is controlling a $500,000 asset for three months for only $5,000. No matter what happens during that time, the most he can lose is $5,000. Suzie, on the other hand, is happy to take the $5,000 as she had no guarantee anyone else would buy the house at her asking price nor did she feel the nearby parcel of land would sell anytime soon.

How To Control A $500,000 House With Just $5,000Here’s a footnote to the story. Depending on the circumstances, if Suzie felt she was likely to attract another buyer in the near term, she would have demanded more than $5,000 from Sammy to take the house off the market for 3 months. Likewise with call options, the more the underlying asset is perceived to appreciate, the higher the premium demanded by the market for the call option.

So now let’s define this in trading terms and look at an actual example trade.

A call option is a contract between two parties to exchange a stock at a strike price by a predetermined date. One party, the buyer of the call, has the right, but not an obligation, to buy the stock at the strike price by the future date, while the other party, the seller of the call, has the obligation to sell the stock to the buyer at the strike price if the buyer exercises the option.

Call OptionFor example, if a stock is trading at $50 and you think it’s going to go up to $60, you might buy a $55 call option for say, 20 cents. If the stock rose to $60, that would allow you to buy the stock at $55 even though it is valued at $60, netting you a $4.80 profit on each share. On the other hand, the person that sold you the call would be obligated to sell you the stock at $55 at a loss of $4.80. If the stock never rises above $55 by expiration date, the call expires worthless and the call buyer is out 20 cents, and the call seller keeps the 20 cents.

Win More Trades Than You Lose By Eliminating This 1 Thing?

There are things you do when you trade that absolutely sabotage your chances of building wealth. We call these the “Profit Killers” & there are 7 of them. Our free, 15-second quiz will reveal your #1 “Profit Killer” & then show you how to fix it.

Click Here To Take The Quiz To Discover &
Fix Your #1 “Profit Killer”

(A new window will open so you won’t lose your place on this page.)

How Put Options Work (or, How To Get A Brand New $40,000 Truck For $1,500)

Now let’s look at how put options work by revisiting Suzie and Sammy.

How To Get A Brand New $40,000 Truck For $1,500Sammy owns a truck worth $40,000. He is concerned that his truck may be damaged in an accident or stolen. So, Sammy decides to buy a zero deductible insurance policy (a “put option”) on the truck for the full amount of $40,000 (the “strike price”) from Suzie’s Auto Insurance Company.

Suzie charges him $1,500 (the “option premium”) for a one-year policy. One year being the “expiration date”.

Now three things could happen in this story.

Screen-Shot-2015-05-01-at-1.02.15-PMIn Scenario 1, Sammy’s truck is not damaged or stolen during the years, so Suzie keeps the $1,500 premium. Sammy is OK with “losing” the $1,500 for the protection it provided him for the year.

How To Get A Brand New $40,000 Truck For $1,500 - Scenario 2In Scenario 2, Sammy’s truck is damaged in an accident, requiring $10,000 in repairs.

He “exercises” his insurance policy (his “put option”) by filing a claim, and Suzie pays him $10,000 for the repairs as agreed. Sammy is happy he purchased protection for this possibility.

How To Get A Brand New $40,000 Truck For $1,500 - Scenario 3In Scenario 3, Sammy’s truck is stolen. He “exercises” his insurance policy (his “put option”) and files a claim, but this time for the full replacement value of his truck, and Suzie pays him the full amount of $40,000 to buy a new truck.

How To Get A Brand New $40,000 Truck For $1,500 - Scenario 3Sammy, of course, is very happy he purchased protection for this possibility.

How To Get A Brand New $40,000 Truck For $1,500 - Buy ProtectionIn any case, Suzie is happy because she sold many such insurance policies (different “put options”) to other drivers, most of which never filed a claim (or were never were “exercised”), providing her with a net profit.

And here’s a footnote to this story. If Sammy had a poor driving record, that is more risk to Suzie, so she would have charged him more than $1,500 for the one-year insurance policy. On the other hand, if Sammy had an exemplary driving record, Suzie could have charged him less, as the risk would be lower. Likewise with put options, the higher the perceived risk, the higher the premium demanded by the market.

Let’s look again at a definition and a trading example.

A put option is a contract between two parties to exchange a stock at a strike price, by a predetermined date. One party, the buyer of the put, has the right, but not an obligation, to sell the stock at the strike price by the future date, while the other party, the seller of the put, has the obligation to buy the stock from the buyer at the strike price if the buyer exercises the option.

Put OptionFor example, if a stock is trading at $50 and you think it’s going to go down to $40, you might buy a $45 put option for say, 20 cents. If the stock dropped to $40 that would allow you to sell the stock at $45 even though it’s valued at $40, netting you a $4.80 profit on each share. On the other hand, the person that sold you the put would be obligated to buy the stock from you at $45 at a loss of $4.80. If the stock never drops below $45 by expiration date, the put expires worthless and the put buyer is out 20 cents and the put seller keeps the 20 cents.

So that’s how call and put options work. You might not know it, but by avoiding options, you’ve been unintentionally sabotaging your chances of having the potential to build wealth by trading in your portfolio.

And there are actually other things you’re doing right now when you trade that making it almost impossible to consistently get ahead in the markets. I call these things the “Profit Killers”, and I’ve identified 7 of them.

But I also developed a free analysis tool that can pinpoint what your #1 Profit Killer is in about 15 seconds. Once you discover what it is, then it’s easy to eliminate it. And once you do that, your chances of winning more trades than you lose can skyrocket, almost immediately.

Go here to discover your #1 Profit Killer and learn how to eliminate it forever.