Bullish Vs Bearish, How Do You Know The Difference? ♉⛎

February 24, 2021

How Do You Know If A Stock Is Bullish Or Bearish?
How Do You Know If A Stock Is Bullish Or Bearish?

Bullish Vs Bearish is definitely something you better have a solid handle on if you are planning to invest any of your money in the stock market. 

The good news is that once you understand the difference between these types of stocks, it's quite easy to differentiate between them.

There are also specific investment strategies that you can employ for each type of stock that can help you to make money with them.

Bullish Vs Bearish Explained

Bullish VS Bearish Market

The stock market is full of terms that can be intimidating and difficult to keep track of. But, taking the time to learn the stock market terminology can help to set you up for the long road ahead.

What Is A Bullish Stock?

Bearish Stock

A bullish stock, in simplest terms, is a stock that has been trending upward.

What causes a bullish stock to trend upward? 

There are a number of factors, but the driving force behind its ascent revolves around the confidence of investors.

When investors are confident that a stock will remain bullish they will continue to buy it.

As the demand increases for the stock, the price rises. It's a simple matter of supply and demand. 

Now, what could drive investor's confidence and push them to buy stock and drive it's value up?

There are a number of things that usually get a stock trending upward:

  • First, there could be a lot of buzz about the company in question. Maybe they acquired another company.
  • Maybe they had some kind of breakthrough and had a new product that nobody has seen before.
  • Maybe they simply posted better earnings than were expected. No matter what the cause, if a stock is trending upward strongly, then it is a bullish stock.

Now, how can you take advantage of a bullish stock? 

Well, since it is trending upward, and has a strong history of doing so, it's usually safe to assume it will continue to do so.

That means that your money isn't placed in as much risk when you invest in a bullish stock that has a solid history.

While investing in a bullish stock is usually safer, the problem is that there are limitations on how much money you can expect to make investing in bullish stocks.

Since these stocks are in high demand, their price is going to be high.

So there are limits on how many shares you can buy unless you have a huge amount of funds you can draw on, which most of us don't.

Tim Sykes Post on Bull Flag Trading has some amazing info on this!

What Is A Bearish Stock

Bullish Stock

A bearish stock is the opposite of a bullish stock, it's a stock that has been steadily declining for some time and shows a consistent trend of doing so.

This may seem like a stock to avoid, but if you employ the right strategy there is money to be made here as well!

What causes a stock to become bearish?

There are many factors involved here, but once again, it all comes down to investor confidence. If a stock is bearish then investors will be less interested in it, so there will be less demand.

With less demand comes a lower price.

Typically speaking, a company that struggles with lower earnings, or even losses, will cause it's stock price to drop, which can lead to it becoming a bearish stock. In many cases, a bearish stock will drop in price very quickly giving investors very little warning.

Should you invest in bearish stocks?

If you can learn to use bearish stocks to your advantage, then you should absolutely consider investing in them.

Bearish stocks tend to be lower in price than bullish stocks, making them more affordable.

While being more affordable is a good thing, since it allows you to buy more shares per dollar invested, it's of small comfort if the value of the stock is expected to continue to decline.

But, if you do your homework, and spend the time required to properly research a company, then you can determine whether or not a bearish stock appears to be primed for a turnaround.

If a company is showing signs of life, such as an increase in earnings that was unexpected, then this could be a sign that things are going to turnaround for the better.

In this case, if you can buy stock in the company while the price is still down, you could be looking at a nice profit if you guess correctly.

For more info on this, I once again defer to Timothy Sykes' Blog: 8 Ways to Survive and Profit from a Crash/Bear Market

Take Advantage Of Free Trading Tools Provided By Online Trading Companies

StockCharts.com Example

Do you have the time to monitor hundreds of stocks on a daily basis and track how they are trending?

Probably not, and if you tried to do all of the work yourself then you'd probably go crazy trying to process so much information.

The great news is that there are many companies that offer free tools that can do the analysis for you.

They can spot stocks that are bullish or bearish and help you to look for those all important patterns that can help you to decide when you should be buying or selling a particular stock.

If you are interested in trading stocks, the finding an online broker is a great way to do it while avoiding the higher fees that a traditional broker tends to charge. Another great advantage of an online broker is the free trading tools that they provide to investors.  

I'm a fan of StockCharts.com. With it, you can create candlestick charts as well as line and bar charts. The software offers up to three years of data if you have a free account. Upgrading to a paid account gives you access to even more data.

Another great example is the Thinkorswim Desktop, by TDAmeritrade which gives you access to elite-level trading tools and a platform backed by insights, education, and a dedicated trade desk.

In Closing: Bearish Vs Bullish

I hope by now you have a better understanding of Bearish & Bullish Stocks.  As you no doubt know, trading stocks is complicated, if it wasn't then everyone would do it. 

It's hard work, but much like any other type of hard work, it can pay off substantially if you are willing to put in the time and effort.

Understanding Bullish VS Bearish stocks is a simple but important lesson.  Remember that It takes time to master anything that is as complex as the stock market, and even seasoned professionals make mistakes on a semi-regular basis.

The key here is to learn from your mistakes, not get discouraged, and keep on moving forward.

It's going to take time, and you have to be patient with yourself. You have to recognize that there is a learning curve, so start out slow.

Do your homework. Learn the terminology. 

Find an online brokerage that is right for you. Then, you can start to look for opportunities that can help you to build long-term wealth.

What Next?

Over the years I've reviewed DOZENS of Investment newsletters. As a result of this, I've also spent quite a bit of time doing reviews of my FAVORITE Stock & Investment Newsletters, which you can read below!

While these programs are ALL amazing, If I had to pick one, it'd be a toss up between The The Near Future Report & Profits Unlimited.

Both are written by experts at the VERY top of their game, and I've made good money investing on picks from both of them!

About the author 

Jenna Lofton

Jenna Lofton was Born in Maine and lives in Staton Island, NY. She holds an MBA in Finance from the University of Maryland and has been actively trading stocks for nearly 11 years.

{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}