Definition: A bull market can be best described as a period when stocks, indexes, and commodities are all going up. These uptrending markets can last anywhere from 6 months to 4 years. A bull market is also a sign that the economy is doing well. Most of the money trading stocks is made at the beginning of this cycle, and it would be wise to recognize the the difference. By using technical analysis and analyzing stock charts you can identify the beginning, and end of a bull market cycle. In the charts below you will learn how technical analysis is applied to identify a bull market. Some of these methods include reading stock charts using technical analysis.
How To Recognize A Bull Market
Buy stocks only in a bull market. Before buying breakouts……YOU MUST KNOW what stage the market is in. The markets as a whole must be in a bullish phase. The bull market runs in cycles, and depending on what stage it is in, you will implement the Breakout Strategy.
The market has three stages. Uptrend (BULL) , Flat, and Downtrend (Bear).
When the market is in an uptrend this is when you will be buying breakouts.
When the market is Flat or in a Downtrend, you will trade the range or short the breakdown. Shorting Stocks will be discussed later in the Advanced section of this tutorial.
A Bull Market Is Green Uptrend Line
A Bull Market In The Nasdaq Index
Below is another example of of market stages. Included in the charts below is the real estate financial crisis. On Jan 2008 the market went from flat to bearish, and my whole portfolio started shorting stocks. I’ve never made so much money in my whole life. If you’ll notice bear markets go down faster that bull markets because of the element of panic. If you simple track the indexes and update your charts. You will be prepared to take advantage and go with the trend. No guessing, no gut feelings, just due dilligence, and check your index charts once a week. Nothing complicated about that. However, most traders fail to look at he market indexes.
Example of Bull Market Cycles
Bull Market Transition To A Crash / Bear Market
If you look at the chart below, you can see the recovery was sudden. The market went flat for a very short period of time. You can’t see it because you are looking at monthly bars on the chart. But on the daily bars the market went flat for about 4 months. Then the market crashed out around July 2010.