In this article, I want to show how to analyze stock price movement to forecast possible trend change and try to predict where the stock price may go using some great solutions.
Before we begin, please read the article on Cheap Stocks To Buy Now that will help you choose undervalued (cheap) stocks that look strong fundamentally. You need fundamentally strong stocks even if you are not planning to hold them long-term, because you need to make sure that the stock will rebound fast if it starts falling. This usually happens with fundamentally strong stocks, where if you hold a weak stock, it may not rebound fast or start trading flat after a major price drop. After reading the mentioned article and understanding how to choose stocks, it’s time to undertake some technical analysis to understand when the trend may change and when you may need to close your position if trading on a shorter time interval. But if you buy stock for the longer term, this article will also be useful to you since you need to know when is the best time to buy your chosen stock, and then regularly check company fundamentals, only selling the stock when the fundamentals worsen. Now let’s begin.
PREDICTING THE STOCK PRICE: Where the stock price may go within a few days.
First, let’s go to the Tradingview website, register/login, and then input the stock ticker in the search bar. I am taking the NVDA share as an example. When I do technical analysis, I avoid using many indicators and confusing charting tools. Simple support and resistance, combined with volumes and Japanese candlestick patterns analysis, is all I need to forecast possible trend changes. As you can see, I drew simple support and resistance for NVDA stock (the image below). Notice when the price is approaching the support line, the lower line, the volumes go up, signalling that buyers are active at that level, and when the price approaches the resistance line, the upper line, the volumes also go up, signalling that sellers placed their sell orders at that level, pushing the stock downward. If you are not sure if you drew the lines correctly, look at the volumes. They should go up rapidly at the point where the price is touching the support or resistance.
Note that support and resistance are not always horizontal lines. They can be at a certain degree, telling that buyers/sellers are placing their orders as the price goes up or down, not necessarily at a fixed level. You can easily spot the level just by seeing where the price bounces back after falling, or starts falling after going up, and as with horizontal support and resistance, double-check with volumes too.
We draw those lines to have an idea of how the price can move and if the stock still has some upside on the shorter term. In the case of NVDA, it was trading around 138.85, and the resistance is at 146, meaning that the price can still go up till it hits the resistance. And then, if the larger seller is still there, the price may start falling again. Or the stock may go up if the seller is done selling or if the buyers are too confident and start pushing the stock upwards with their volumes. But it’s highly likely that the stock will start falling once it reaches the resistance.
SETTING THE Stop-Loss and Take Profit: Where the stock price may go within a few weeks.
Now let’s see where you can consider selling the stock if you bought at the current level. Of course, we may sell somewhere before it reaches the resistance, but there is another way of setting your sell point: that’s through standard deviation. In simple terms, standard deviation is a stock's volatility; it shows by how much the stock fluctuates for the period from its mean value. Simply calculate stocks’ standard deviation (SD) for the period (let’s say 2 weeks if you are planning to sell within the next 2 weeks) and then subtract two SD from the stock purchase price (or current price if you are setting your sell point now), you get the stop loss sell price, and add three SD to the stock price, you get the take profit sell price. If you are lazy calculating manually, you can use the Stock Analyzer Chrome Extension. Input your API key and stock ticker and hit the Calculate button to get suggested stop loss and take profit based on the standard deviation.
As you can see from the image below, the Stock Analyzer Chrome Extension suggests selling with a loss if the stock starts falling to 121.32 and selling with a profit when the stock reaches 164.95. The app analyzes NVDA's volatility and thinks that this move is possible within a shorter time frame. Now you know that if you hold the stock for a few days, it still can reach 146, but if you are planning to hold for a couple of weeks, it can reach 164. But please regularly check the news surrounding the company as it can affect the stock price and also make sure the company's financials did not worsen, as this may send the share to the downside. And also remember that we never know for sure where the stock price may go, as there are so many factors involved. That’s why stock market risk is sometimes called uncontrollable risk, but using the technical analysis, we can have an idea of where the price may go if no shock events will happen.
By using the Stock Analyzer Chrome Extension, you have a clearer picture of when to sell your chosen stock if you are not planning to hold it for a longer term. But as I have mentioned, always monitor company news and corporate events at the time of setting your SL and TP levels, as those events may negatively affect the stock price.
FOR INTRADAY TRADERS: Best Stock Prediction App or where the stock price may go within the next 5 minutes.
By now, you know where you should set your SL and TP and see the possible stock trading range. But what if you are trading intraday and want to make multiple trades within the same day? I also have a solution for you, Best Stock Prediction App: the Stocks 2 Buy iOS app. Download it from the App Store, register/login, then go to the Candle Analyst screen and input the stock ticker in the search bar (NVDA in our case), then press the Refresh button. The app will analyze Japanese Candlestick Patterns and provide you with trade recommendations highlighting possible trend changes. The app shows live prices, updates every 5 minutes, so it’s a good idea to hit the Refresh button every 5 minutes to track for new patterns and trade recommendations. Lets see what the Stocks 2 Buy app shows us:
The app identified the Bullish Engulfing pattern at 14:50, suggesting an upside with the 📈 sign. Indeed, after the pattern, the stock price went higher. The next 3 patterns are Bearish Engulfing with the 📉 sign, suggesting a possible downside. Although the stock keeps going higher, opening long positions (buying shares) after seeing bearish patterns can be a bad idea as there is a high probability of a stock downside. The last Bearish Engulfing is stronger than the previous two, suggesting that buyers’ intent is broken and sellers are taking over now. This may result in the stock going lower in the next 5 minutes.
As you can see from the above example, the pattern is not always resulting in immediate price upside or downside. This may be due to larger buyers pushing the stock upwards, or speculative traders’ phantom moves. Sometimes it takes time, but consider waiting a bit, not buying a share if seeing 📉 sign with a bearish pattern as there is a higher probability of a downside as sellers are taking over. And consider opening a position after 📈 sign but wait a few more confirmations for a stronger signal, probably a few other bullish patterns or positive news or corporate events surrounding the company.
The app provides different popular patters and suggests when the best time to buy a share is on intraday. But as I have said earlier, no one knows with high accuracy what will happen with the stock price as there are many factors that come into play, but by using the Japanese candle patterns analyzer, you increase your chances of closing intraday positions with profits; just don't be in a hurry and look for a second strong pattern together with positive news surrounding the stock.
I hope you now have a clearer picture of how to forecast the stock price. Just keep your graph as simple as possible, as many indicators and charts can confuse you and provide misleading, contradictory conclusions. And remember that no one knows for sure what the stock price will be within the next 5 minutes, 1 day, or a week. As there are so many things that come into play, starting from different news surrounding the company, financials, company competitors, and ending with macroeconomic and political tensions. But using valuable tools that I showed you in this article, you increase your chances of closing shorter-term (daily, weekly) positions with profits.
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