Apple, Inc (NASDAQ:AAPL), Carnival Corp (NYSE:CCL) and JP Morgan & Chase (NYSE:JPM) are all trading higher in strong uptrends. An uptrend occurs when a stock consistently makes a series of higher highs and higher lows on the chart.
The higher highs indicate the bulls are in control while the intermittent higher lows indicate consolidation periods. Traders can use moving averages to help identify an uptrend with rising lower timeframe moving averages (such as the eight-day or 21-day exponential moving averages) indicating the stock is in a steep shorter-term uptrend and rising longer-term moving averages (such as the 200-day simple moving average) indicating a long-term uptrend.
A stock often signals when the higher high is in by printing a reversal candlestick such as a doji, bearish engulfing or hanging man candlestick. Likewise, the higher low could be signaled when a doji, morning star or hammer candlestick is printed. Moreover, the higher highs and higher lows often take place at resistance and support levels.
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In an uptrend, the “trend is your friend” until it’s not, and in an uptrend there are ways for both bullish and bearish traders to participate in the stock:
- Bullish traders who are already holding a position in a stock can feel confident the uptrend will continue unless the stock makes a lower low. Traders looking to take a position in a stock trading in an uptrend can usually find the safest entry on the higher low.
- Bearish traders can enter the trade on the higher high and exit on the pullback. These traders can also enter when the uptrend breaks and the stock makes a lower low, indicating a reversal into a downtrend may be in the cards.
The Apple Chart: Apple reached a new all-time high of $182.94 on Tuesday, and on Wednesday the stock was trading almost 1% lower in sympathy with the SPDR S&P 500 (NYSE:SPY). For Apple’s uptrend to continue it must hold above the most recent higher low, which was printed on Dec. 31 at $177.26.
The Carnival Chart: Carnival has been trading in an uptrend since the stock printed a bullish double bottom pattern on Dec. 1 and Dec. 2 at the $16.38 level. On Tuesday, the stock printed its most recent higher high at $22.38 and on Wednesday, Carnival looked to be printing another higher low. Carnival is also settling into a bull flag pattern on the daily chart with the pole formed between Dec. 31 and Jan. 4 and the flag created on Tuesday and Wednesday. Carnival must hold above $20.02 for the uptrend to continue.
The JPMorgan Chart: JPMorgan hit a bottom at $151.84 on Dec. 20 and reversed course into an uptrend. The stock’s most recent higher low was printed on Dec. 31 at the $157.96 mark, and JPMorgan must hold above the area to continue in its uptrend.
On Wednesday, JPMorgan was consolidating Tuesday’s higher high by printing an inside bar on the daily chart. The inside bar leans bullish because the stock was trading higher before forming the pattern.