Online Stock Trading - How to Recognize a Bottom in a Stock Price
When a stock is falling, you obviously want to buy it when it hits the bottom. But how do you know when it has hit the bottom. The fact of the matter is that no-one knows for certain, but there are some clues to look out for. Stock charting technicians believe that stock volume and stock price are the two most important indicators that show where a stock is headed next.
Stocks tend to have reached bottom when there are not many sellers left. If there are few sellers then more buyers remain who are willing to pay a higher price - consequently a bottom has been reached.
To be specific you need to look at the volume compared to average volume. If stock A's average daily trading volume was 10 million shares as its price fell 50%, but over the last 3 days it has averaged over 30 million shares daily and the price has moved up, it is probable that the stock has reached a turning point and has stopped falling significantly.
Volume adds credibility. The higher the relative volume once the stock has stopped falling, the more likely it is that it will not see lower prices in the near future.
See also stock trading for beginners
Some Newspaper Share Recommendations
THE TIMES
Tempus:
Drax avoid for now
Hold Jardine Lloyd Thompson
Buy Rotork on weakness
Tiddler to watch - Pace
DAILY TELEGRAPH
Questor:
Buy Senior
Buy Wood Group
THE INDEPENDENT
Investment Column:
Buy Provident Financial
Buy Admiral Group
Buy Pace
Comment:
Nomura recommends Barclays as a short
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