learn
Basic

5 Common Buy Signals In the US Market

Basic

Mins Read 3

img

Should you buy the stock? Should you wait? When you're investing, it's easy to get overwhelmed by too much information. How do you know what signals a buy? How can you better understand the performance of a specific company's stock? 

A buy signal (aka entry point) helps you determine when to purchase a specific asset, so you know you're following your investment strategy.

1. Trading volume is a solid buy signal when used correctly

Trading volume is the total number of stocks traded during a given period. This indicator reflects the overall activity of a specific security or the market itself. Many investors and analysts use trading volume to identify and examine market trends and help make their trading decisions.

Pro tip: Trading volume can be a buy signal or a sell signal for stock, so you need to check whether the security's market trading direction can help you make your move.

Where to find: The volume indicator on your trading software

2. Number of options calls 

The number of options calls might also increase on a particular asset. Options calls are bets that the stock will rise by a specified date. A high number of options calls indicate not only a serious interest in the underlying share but a belief the share value will rise. This doesn't always mean you'll see good earnings.

Where to find: Options chains on financial websites online such as Yahoo Finance and the Wall Street Journal Online

3. Look at intrinsic value

The intrinsic value is an objective value of a stock, asset, or security. If the share value goes above that inherent value, it might be a good purchase. 

Most intrinsic value equations use three methods: 

  1. Discounted cash flow analysis

  2. Asset-based valuation

  3. Financial metric analysis

Analysts compare intrinsic value to the share's current market price to determine whether it's overvalued or undervalued. This comparison helps investors calculate a margin of safety where the market price is below the intrinsic value. This cushion enables you to limit your risk if the stock is worth less than the assigned inherent value.

Where to find: Analyst calculations

4. Analyst earnings expectations can serve as a buy signal

Analysts do a lot of research about market trends and release their estimates for a company's quarterly or yearly EPS (earnings per share). These estimates drive the valuation of companies trading on the market. 

These earnings estimates can make or break a company's profitability, as they provide detailed summaries that can strengthen or weaken investors' belief in the company's short and long-term vision.  

Where to find: In stock quotations or financial publications such as The Wall Street Journal and Yahoo Finance

5. Moving averages round out the list of buy signals in the US market

The last entry point is a moving average of a share. This moving average is just a mean of different averages of a share's price over time.

The higher the average, the more optimistic analysts and other investors are about the company's profitability. 

The more experience you get as an investor, the better you'll understand these easy-to-find buy signals. 

Where to find: The moving average indicator on some trading software

Never miss a thing!

news and markets updates

* Terms apply

Raseed Invest Limited © 2021 - All Rights Reserved.

Raseed Invest Limited (“Raseed”) registered in the Dubai International Financial Centre (“DIFC”) and is regulated by the Dubai Financial Services Authority (“DFSA”) to conduct financial services “Arranging Deals in Investments” with a 'Retail' endorsement. Raseed does not provide any trading or investment advice and shall not be responsible for any loss arising from any investment based on any general information provided by Raseed or as may be available on Raseed’s website and other web-based services (collectively, the “Website Services). Raseed does not warrant that the information is accurate, reliable or complete or that the supply will be without interruptions. Any third party information provided through does not reflect the views of Raseed.

The content of the Website Services provided by Raseed is only intended to provide you with general information and is neither an offer to sell nor a solicitation of an offer to purchase any security and may not be relied upon for investment purposes. Any commentaries, articles, daily news items, public and/or private chat publications, stock analysis and/or other information contained in the Website Services should not be considered investment advice.

Raseed shall not be liable for any delay, inaccuracy, error or omission of any kind in the information provided by Raseed and/or any third party information provider or for any resulting loss or damage you may suffer as a result of or in connection with the information supplied by Raseed and/or any third party information provider. In addition, Raseed shall have no liability for any losses arising from unauthorized access to information or any other misuse of information.

Any opinions, news, research, analysis, prices, or other information contained on our Website Services or emailed to you are provided as general market commentary, and do not constitute investment advice. Raseed will not accept liability for any loss or damage, including, without limitation, for any loss of profit which may arise directly or indirectly from use of or reliance on such information. Each decision as to whether an investment is appropriate or proper, is an independent decision by you. You agree that Raseed has no fiduciary duty to you and is not responsible for any liabilities, claims, damages, costs and expenses, including attorneys’ fees, incurred in connection with you following Raseed’s generic investment information. Raseed makes no representations as to whether a particular investment is appropriate or suitable for you.


View important disclosures