How to Predict Future Stock Prices

Know How to Predict Future Stock Prices and Plan Out Investments

Predicting accurate future stock prices can help you earn a lot of money. Here are some tips on the same.
WealthHow Staff
Last Updated: Oct 6, 2017
As we all know, stock prices are highly fluctuating and keeping a tab on them is indeed a huge challenge. But, how some seasoned investors manage to succeed in every move they make? Because, they follow a few tricks and the same are explained below.

Be Aware of All News Related to the Markets

As a stock trader, you should be aware of all incoming news about the company, whose stocks you wish to buy. From the news, you can predict whether it will have a positive or negative impact on the stock price. In case of a positive news, positions can be made in advance and on intra-day basis to make good profits. Good research is the key to success in this field.

Study the Chart Patterns

Studying stock chart patterns is very important. Some patterns are bullish, while some others are bearish in nature. In case of a bullish formation, positions can be made for a few trading sessions, and then profits can be booked. In case of a bearish pattern, exiting the stock immediately before the huge free fall would be the right strategy. These patterns help to understand weakness and strength in the stock, thus, enabling us to predict future price targets.

Observe the Volume Growth Carefully

Generally, it has been observed that, there is a real volume growth in the stocks of companies before they start their run up. Try to keep a track of the volumes and calculate the percentage rise or fall. Increasing volumes can mean that, there is growing trader interest due to some positive news. However, if it is continuously breaking down with heavy volumes, then it indicates that, it is going down to a great extent.

Know the Resistance Points Well

The journey of a stock price in the upward direction is never a free one. It has to overcome several resistances at crucial points to go up considerably. Hence, you should be aware of where exactly a stock can face resistance and how strong it will be. Understanding this needs a lot of experience and an ability to study technical charts perfectly. On the downside, you should be aware of where the stock can find good support, so that it does not breach those levels and go down than your expectations.

Wait for a Breakout

Traders are generally advised to enter a stock, once it breaks key levels on the upside. The breakout needs to be with heavy volumes and in a convincing way. Another caution here is that, many mid-cap and small-cap stocks give fake breakouts, which can be dangerous traps for small traders. So, have strict trailing to avoid capital loss.

Keep an Eye on Company's Earnings

A stock needs to be technically as well a fundamentally strong to go up. So, you should be able to predict how the financial results of a company will be to trade the stock. Good results mean increased investor confidence and that implies stock price advancement with good volumes. To predict company profits, you should be knowledgeable about income limits and updates on mergers, stake sells, and acquisitions.

Be Aware of the P/E of the Company

Stock traders must be aware of the price to earnings (P/E) ratio of a company. You can consider the idea of trading those stocks, which are trading at a lower P/E ratio as compared to their peers in the same sector. However, you should note that, this is not the sole criteria for their prices to go up.

DISCLAIMER: This article is just for reference purposes and does not recommend any stock market transactions.