How To Spot A Bottom In Stocks

Hello and welcome to this short course on how to spot a bottom in stocks. By the end of this course, you will come away with quite a lot of knowledge on how to spot a bottom in stocks.

With this knowledge, you will be able to analyze the stock market and stocks more effectively. Perhaps you might find it useful in your investing or trading as well.

This course will not be very long. It is what I would like to call 'short and sweet'.

But some of you might find it not so short and sweet as some studying is required. There will be quite a lot of charts and samples of past stocks bottoming.

In order to know what might happen in the future, one needs to study the past. It is by studying history we are able to learn from the lessons that they give us. You will also be able to spot the same pattern in future stocks.

The good thing about the stock market is this...

It repeats itself again and again.

Which is why chart patterns can be quite reliable and useful to help us spot bottoms.

Before I continue, let me share with you the topics in this short course. That way, you will be able to have a bird's eye view on what to expect in this course.

  1. Why do stocks / the market bottom

  2. The 4 stages of the stock market

  3. The basing stage of a stock

  4. The concept of support in a stock

  5. Long term bottoming in a stock

  6. Short term bottoming in a stock

  7. The powerful 50 MA and 200 MA to stop stock from dropping

  8. The breaking of trend lines that hint of a bottom

  9. The double bottom in a stock

  10. The reverse head and shoulders

  11. Triple bottoms in a stock

  12. Rounded bottoms in a stock

  13. The famous cup with handle pattern

  14. Bottoming tails of candlesticks that hint of bottoms

  15. The V shape bottom

  16. The bullish harami

  17. The bullish engulfing pattern

  18. The oversold stochastics

  19. Oversold oscillators and indicators

  20. The bullish divergence

  21. Stock going back above the 20 MA

  22. The powerful price support

  23. Why do you want to spot a bottom

Ok, I think that sounds a lot of hard work on your part to digest the information. But don't worry, you do not need to look at each topic in a single day. Read a few topics each day and I think you will be able to understand and digest it in a week or two.

Technical analysis can be quite...technical.

Therefore, since you are dealing with something technical, don't expect yourself to be able to grasp these concepts immediately. Take your time to go through the material once and then continue to read them a few more times.

You will be embarking on a great learning journey

Why Do Stocks Bottom

In order for you to know how to spot stocks that are about to bottom, you should understand the reason why stocks bottom.

So why do they bottom?

Think...why do stocks go down in price?

The reason why stocks go down in price is because people are selling the stock. Nobody seem to want the stock. That helps to push the stock price down.

Supply and demand determine the price of a stock. If there are more people buying than selling, then the stock price will go up. 

On the other hand, if there are more sellers than buyers, then the stock price will go down.

There will come a time in the stock's life that enough people who want to sell the stock has already sold enough of it.

When supply equals demand, the stock price will flatten out. 

The stock price will refuse to go down further. Some very smart traders and investors will also start to buy into the stock. This will help to drive the price up soon.

The 4 Stages Of The Stock Market

The stock market goes through cycles.

Just like an economic cycle, the stock market has its ups and downs. In the same way, stocks can also have their ups and down.

First the stock bases, then the stock start to rise in price. Eventually the stock tops out. Then a sell off begins.

Therefore, there are 4 stages to the stock market or to stocks. In fact everything that can be traded in the exchanges have 4 stages. The 4 stages are:

  1. Stage 1 - Basing

  2. Stage 2 - Uptrend or bull market

  3. Stage 3 - Topping

  4. Stage 4 - Downtrend or bear market

Basing

This is where the stock

trades sideways without

much movement. Things

are pretty boring

Uptrend

This is the most exciting part of

a stock's journey. The stock price keeps going up and up and up. Lots of people make a lot of money during this period

Topping

Stocks don't go up forever. Eventually the market tops out and they can't go any higher.

Downtrend

This is where a crash happens or the stock starts to make lower prices. We call this a downtrend. Many people lose a lot of money during this stage.

I think the best way to help you understand is to show you a chart of a stock that goes through these 4 stages. Take a look at the daily stock chart of Apple.