Bullish Vs Bearish, EVERYTHING You Should Know!

July 5, 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

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?

Bullish Stock Chart

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. 

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.

How can you take advantage of a bullish stock as an investor in today's market? 

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, so check it out and let him know I sent ya!

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.

As an investor, should you invest in bearish stocks?

Check out this great video by Timothy Sykes on trading in a bear market.

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

Bullish Vs Bearish - Which Is Better To Buy?

Is it better to buy bullish or bearish stocks?

This is a question that many investors are asking themselves.

The answer to this question varies depending on what type of investor you are, and the market conditions at the time.

Let's go over some factors that may help you decide which type of investment strategy is best for you!

Factor # 1: The Type of Investor You Are

As an aggressive investor, your goal would be to maximize returns in a short period of time by taking more risks than someone who prefers a conservative approach.

If you're investing with the long term in mind or if it's difficult for you to react quickly when there are big changes happening in the markets, then maybe bearish stocks might work better.

But as an aggressive investor looking for high return potential - bullish stock investments could suit your needs well!

Factor #2: The Market Conditions

If the market is on a steady rise, you could potentially benefit from buying bearish stocks because they are typically less expensive. But if there's downward pressure or volatility in the markets, it might be better to invest in bullish stocks instead due to their higher potential for returns.

Before making any investment decisions, make sure that you've considered all of these factors and looked at how both types of investments can work well for your particular situation! Do the research first, this is critical.

Factor #3: Know Where The Most Potential Is

In general, bearish stocks are safer investments. They have a greater potential for higher returns but they also come with much more risk than bullish stocks do because their prices might be lower and volatile.

Bullish stock markets tend to perform better when the economy is strong - so if you're investing in an already healthy company that has good prospects for future growth, it may be worth buying some of these types of shares as well! You can't go wrong with either type of investment decision!

Factor #4: Performance over Time

f you pay attention to how your investments are performing over time, this will give you a lot more insight into whether or not any one particular strategy works best in your given situation.

What you're going to want to do is judge your investments on both their capital gains as well as the annualized return rate. The way that this works is by dividing how much money you made with regard to what you originally invested in order for it all to work out properly. If you like, try looking up some of these metrics online so that it's easier for your decision-making process!

Factor #5: Risk and Return Rates

Sometimes investing isn't just about making a profit - but also preserving your wealth instead of risking everything trying to get ahead through taking big risks. Be sure not only to consider growth potential when deciding which type of investment strategy will be best suited for any given situation!

Can You Trade Both Bullish and Bearish Markets?

Bullish VS Bearish Market

Yes, you can - however, there are some stipulations.

The first is that you have to understand what they are so that you can become a more informed trader.

Here we will discuss the difference between these two types of markets as well as how each affects your trading strategy.

  • A Bull Market is when the prices of stocks, bonds and other assets are going up. The market’s sentiment changes from pessimistic to optimistic.
  • A Bear Market is a time period in which stock values fall drastically or there is an economic recession where people stop spending money as freely (read: consumer confidence). This causes the prices to decrease significantly for investments like stocks and commodities.

You can trade both bullish and bearish markets by knowing how they work so that you can formulate a strategy accordingly.

When Does a Market Change From Bear to Bull?

Many people are interested in knowing when the stock market will turn around.

  • When does a bearish market change into a bullish one?
  • When do bull markets stop and bears start to take over?

These questions are hard to answer, but we can look at trends to get an idea of what is happening.

Here we will discuss some of the most important factors that lead up to these changes and how they affect your investments.

Understanding when we should invest more or sell is essential for any investor who wants to be successful.

Knowing what's happening with the market before it happens gives you time to prepare and react accordingly. It also helps identify larger patterns over time rather than just having short bursts on information coming at us all day long which makes spotting trends easier as well."

That being said, let's talk about the most important factors that lead up to these changes and how they affect your investments.

First, let's start by looking at consumer spending. 

When consumers are feeling confident in their personal finances and business is going well, it makes sense for them to spend more money than usual on entertainment or purchasing products like electronics. Consumer confidence soars because of this higher level of consumption.

Second, we should look at unemployment rates.

If people don't have jobs then there isn't as much income coming into the market which means fewer purchases being made with wages from those jobs. That can be a bearish sign for stocks since companies will make less profit over time unless they find another way to increase revenue without hiring new employees.

Third, let's look at housing markets. 

When a housing market is booming, people tend to feel more confident about investing in their future and they'll spend more money on things like buying new homes or remodeling existing ones.

Lastly, let's take a look at the value of stocks themselves

If prices are going up then it makes logical sense that consumers will want to buy into those stocks since they're making gains. That would be considered bullish for stocks which can make them attractive investment opportunities again because investors know there an opportunity for growth even though other areas may not look as good.

The truth is that you never know when exactly bull markets start but there are signs such as these that indicate whether one might be approaching.

To Help Your Chances of Success as a Trader in Today's Market, Take Advantage Of Free Trading Tools Online!

StockCharts.com Example

StockCharts.com Example Chart

TRUST ME when I say these tools are LIFE-CHANGING for any trader or person looking to get into trading.

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. (chart example above), 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!

These are all created by experts at the VERY top of their game, and are 100% worth checking out!

About the author 

Jenna Lofton, the founder of StockHitter.com, has been actively trading stocks and investing for nearly 11 years.

She holds an MBA in Finance, and another in Business Administration, and lives in Staten Island, NY.

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