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Discover the key technical elements to determine if you should buy a stock.

1. Prior to a stock price rise, the volume will diminish, until all sellers (supply) have exhausted themselves. Odd small lot sales can be a signal of the end of the price decline.

2. In a downtrend the bottom will occur in the 3rd, 5th or 7th wave down. Now the price can make a dramatic jump here and will tackle overhead resistance. The key thing to look for is a very large increase in Volume. Institutions will move in and usually make their purchases between 3:30 and 4:00 p.m. This is called looking for Footprints. So essentially we are looking for strong hands to move in.

3. They say don't buy the first breakout. If you do buy the first breakout run with tight Stops. You can also wait for price to return to test the breakout point (support level). If price successfully tests support and breaks above this point you can buy the stock. You can also put in a buy stop at 3 percent above the breakout level. This will keep you out of the stock unless it breaks out.

4. If price has been in an uptrend but is correcting, look to see how it reacts to the 38.2 and 50% retracement levels. A stock that rebounds from the 38.2% Fibonacci retracement level is a strong stock.

5. If price gaps up with large volume and the gap is not filled that day, with price ending close to the high of the day, then this confirms a 'rising stock price'. If the gap occurs over a resistance point then this is double confirmation to enter.

6. If you see a very long white candle with a long tail occur with volume pay special attention and be prepared to buy if positive buying occurs the next day. Candlestick formations to look for are Bullish Engulfing, Morning Star and Three White Soldiers.

7. When the up days outnumber the prior down days this usually confirms that you have entered a bullish uptrend.

Learn more about this author, M. Bellezza.
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