Strong stocks often exhibit a series of characteristics before they start to rise, which can help investors identify potential strong stocks and enter at the right time. Here are several common characteristics before a strong stock starts:
1. Low-position volume contraction consolidation
Before a significant upward trend, strong stocks will often go through a period of low-position volume contraction consolidation. During this phase, the stock price hovers at a relatively low level, and the trading volume significantly contracts. This consolidation usually indicates that the main funds are quietly accumulating shares, market selling pressure is reduced, and preparations are being made for the subsequent rise. If during the consolidation process, the stock price experiences multiple tentative rises but fails to break through, and then falls back to a low level without an increase in trading volume, this is often a sign of the main force's protection of the stock, indicating that an upward trend is imminent.
2. Technical indicator divergence
During the low-position consolidation phase, technical indicators such as MACD and RSI may show a bottom divergence phenomenon. That is, the stock price continues to set new lows, but the technical indicators no longer set new lows and even begin to rise. This divergence phenomenon usually indicates that market sentiment has bottomed out, bearish forces are gradually weakening, and bullish forces are beginning to accumulate, providing momentum for the subsequent rise.
3. Moving average system support
Before a strong stock starts, the moving average system usually forms good support. For example, the 5-day moving average, 10-day moving average, and 20-day moving average may gradually converge to form a bullish arrangement. When the stock price obtains support near these moving averages and is repeatedly tested, it indicates that the market buying power is strong. Once it breaks through the moving average system, the upward momentum will be quickly released.4. Formation of Bottom Patterns
Before a strong stock takes off, it often forms some classic bottom patterns, such as double bottoms, head and shoulders bottoms, round bottoms, etc. The formation of these patterns usually requires a certain amount of time, but once confirmed, the probability of an upward move is relatively high. For instance, after the neckline of a double bottom pattern is broken, the stock price often experiences a relatively strong upward trend.
5. Signs of Capital Inflow
During the consolidation phase at lower levels, signs of capital inflow will gradually become apparent. For example, there might be net inflows of main force capital, continuous purchases by Northbound funds, etc. These signs of capital inflow indicate the market's optimism towards the stock, providing financial support for subsequent increases.
6. Positive News
Before a strong stock starts to move, there are usually some positive news factors. These positive factors may include expected increases in company performance, favorable industry policies, significant asset restructuring, etc. These news items attract market attention and provide fundamental support for the stock price increase.
7. Market Sentiment Warms Up
Before a strong stock begins to rise, market sentiment typically shows signs of improvement. This回暖 of sentiment can be attributed to various factors, such as positive economic data releases, optimistic outlooks from industry analysts, or a general shift in investor attitudes towards risk-taking. As confidence in the market grows, it can lead to increased buying activity and contribute to the upward momentum of the stock.The warming of market sentiment is also an important characteristic before the launch of strong stocks. As the overall market sentiment gradually recovers from a downturn and investor confidence strengthens, strong stocks often take the lead in starting. The warming of market sentiment can be judged by indicators such as the increase in trading volume and the rotation of market hotspots.
8. Technical Breakthrough
After the end of the consolidation phase at a low level, strong stocks often confirm the upward trend through technical breakthroughs. For example, the stock price breaks through the previous high, breaks through important resistance positions, breaks through the long-term downward trend line, etc. These technical breakthroughs are usually accompanied by an increase in trading volume, indicating that the market's buying power is strong and the upward trend is established.
9. Chip Concentration
Before the launch, the chips of strong stocks will gradually concentrate. Through the chip distribution map, it can be observed that the chips are highly concentrated within a certain price range, indicating that the main force has completed the absorption of chips, the market's floating chips are reduced, and obstacles are cleared for the subsequent rise.
10. Market Hotspot Switching
In the process of market hotspot switching, strong stocks often become new market hotspots. When market funds flow out of the old hotspot sectors and into the new hotspot sectors, strong stocks often usher in a wave of rapid increases. Investors can capture the launch signal of strong stocks by observing the switching of market hotspots.The typical characteristics of a strong stock before it takes off often include low-volume consolidation at low levels, divergence in technical indicators, support from the moving average system, formation of bottom patterns, signs of capital inflow, favorable news, market sentiment warming up, technical breakthroughs, concentration of chips, and shifts in market hotspots. Investors can use these characteristics to identify potential strong stocks, thereby entering at the right time to achieve better investment returns.
- 25 August'24
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