How Should You Trade When The Stock Is Breaking Its All-Time High
The market is at an all-time high and you see that each day your favorite stocks are making all-time highs too. So how should you be trading these stocks?
When a stock makes an all-time high there is panic because people think that this will cause a major pullback or a major correction. This is something that takes time to figure out and you will not know whether the pullback is a correction or a change in trend.
It is important to know that as a trader how you should position yourself in the case of the market making all-time highs, Bitcoin Loophole full review.
If the market is bullish then the stocks could break their all-time highs and go through its previous high. This could even happen if the particular company is performing well even though the market may not really be very bullish. It is recommended that you buy the stock. But that does not seem to be a simple approach right? Here is how it should be done.
If a stock is hitting all-time highs means that there is still a lot of potential in the stock. Sellers have still not come in and buyers are pushing the prices higher. The stock can be bought here but take care to notice that the stock should be making new highs after a very pullback.
The theory is simple. When a stock breaks its previous all-time high then this means that it is a breakout trade. The stock will mostly have a correction after it has made a breakout. This is obvious because there are many traders, who have been holding on to the stock and seeing a good profit, want to exit their positions. The pullback should not scare you.
The stock should pull back to the closest support level and if there is still momentum left in the stock then it will start its upward move again. This time it will break its previous high and again have a pullback.
You enter the stock when the stock pullbacks the first time and reaches the support level. If it continues to pull back and make higher highs then this should not scare you. But take care to know why the stock is still so bullish.
As soon as you see that the stock is breaking its support levels on a pullback or if the stock is not able to break the last high then this should indicate that maybe the uptrend is ending. You should get out of the trade when the stock starts to make lower highs and lower lows. This indicates that the uptrend has ended and a correction now is likely.