AMC Entertainment Holdings, Inc (NYSE:AMC), Luminar Technologies, Inc (NASDAQ:LAZR) and Royal Caribbean Cruises, Ltd (NYSE:RCL) 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.
In an uptrend, the “trend is your friend” until it’s not, and 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.
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The AMC Chart: AMC may be reversing into an uptrend, as on Dec. 14 big bullish volume came in and pushed it up over 17% intraday. On Tuesday, AMC printed a high at the $32.23 level and on Wednesday the stock was trading lower, which may act as the higher low to confirm the uptrend.
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The Luminar Chart: Luminar reversed into an uptrend on Dec. 6 when it printed a hammer candlestick on the daily chart. The stock has since made a consistent series of higher highs and higher lows and on Tuesday printed its most recent higher high. Luminar is currently rejecting the 50-day simple moving average (SMA), which may indicate the next higher low is imminent.
The Royal Caribbean Chart: Royal Caribbean began trading in an uptrend on Dec. 1 and on Wednesday printed a higher high at the $79.96 level, which was above the Dec. 8 high of $77.50. Like Luminar, Royal Caribbean rejected the 50-day SMA, indicating the stock may now need to print a higher low to gain enough power to pop up over the level.