8 Things I Look For In An Uptrending Stock

8 Things I Look For In An Uptrending Stock

In an effort to reinforce what I know about trading stocks, I thought it would be a good idea to list down key factors in my decision making process to buy a stock.

Keep in mind, I am more of a visual person, so I rely heavily on looking at charts, observing several indicators such as volume, RSI, moving averages, MACD and divergence. But, following a stock’s price along a weekly chart and a 6 month chart are essential to my own success.

Ultimately, I believe in simplicity and a Zen approach when it comes to trading. The more complex you make trading and investing, the more you will only complicate things and somehow lose money. Simplicity is key, and above all,
keeping a calm and patient mindset is very important.

Example 1: The Shell Company

The Shell Company

1. The 6 Month Chart

First off, I look at a 6 month chart of a stock to see if there is an overall uptrend. How is the health of a stock as far as performance is concerned? In the chart above, Shell has an overall uptrend, and dips are small and do not affect the overall uptrend of the stock.

2. 200 Day Moving Average

In the 6 month chart, I look at the 200 Day Moving Average (the pink line). In the chart above, the 200 DMA is on a slight uptrend. And to me that’s a good sign for starters.

3. 20 Day Moving Average

In my 6 month chart, I have added a 20 day moving average indicator (blue line). In this chart, we are looking at a healthy uptrend. And, the 20 DMA is always above the 50 day moving average, and the 20 DMA doesn’t cross below the 50 DMA. To me this is an ideal scenario!

4. 50 Day Moving Average

I observe the 50 DMA (orange line) mainly to see if the 20 DMA crosses below it, which would indicate areas where the stock price falls due to resistance. But, if the 50 DMA is consistently above the 200 DMA like above, this is another ideal scenario.

Example 2: The Shell Company

The Shell Company

5. The Weekly Chart

I also look at a 4-7 day chart to see what’s happening in the short term.

6. Weekly Volume Indicator

In the weekly chart, the first thing I look for is volume in the lower part of the chart. What is it like? Are investors selling or buying?

7. 7 Day Moving Average

I just look for a 7 DMA (blue line) that is on a nice uptrend and doesn’t cross below the 20 DMA.

8. 20 Day Moving Average

I look for a 7 DMA that crosses below the 20 DMA (orange line), which would mean a downtrend in a shorter time frame. And a good signal would be for a 7 DMA to cross above the 20 DMA. In the chart above, both the 7 DMA and 20 DMA are moving parallel in an uptrend, and there is no instance where both cross, which is a healthy indicator and sign that we are moving on a nice uptrend in the short term.

Check out my own portfolio of stocks…

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Carlos Rull

Carlos Rull is a musician living in the San Diego area. His interests include Yoga, Eastern Philosophy, Zen Buddhism, and Gardening. He plays drums, piano, and composes New Age & Ambient music, and his albums are available on iTunes and Amazon.com.

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