Pinterest Inc (NYSE:PINS) was trading about 3.6% higher on Thursday in an uptrend counter-rally to the long-term downtrend the stock has been trading in since Oct. 20, 2021.
Short-term bullish cycles take place within all long-term bearish cycles and although Pinterest looks set to trade higher over the coming days at least, the stock has a lot of work to do to prove the bottom is in.
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 time frame moving averages (such as the eight-day or 21-day exponential moving averages) indicating the stock is in a steep shorter-term uptrend.
Rising longer-term moving averages (such as the 200-day simple moving average) indicate 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 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 Pinterest Chart: Pinterest’s most recent higher low within its uptrend pattern was printed on Wednesday at $18.07 and the most recent confirmed higher high was formed at the $19.35 level on the day prior. On Thursday, Pinterest shot up above the most recent higher high and if the stock now trades down to form another higher low, Thursday’s high-of-day will serve as the next higher high in the pattern.
- When Pinterest rose up to its high-of-day on Thursday, the stock rejected the 50-day simple moving average as resistance. Bullish traders will want to see the stock consolidate under the level for a period of time to gain the power to regain the 50-day as support while bearish traders want to see Pinterest continue to reject the level until the area causes the stock to form a lower low and negate the uptrend.
- Pinterest has gaps above on its chart, with the closest gap between $21.12 and $21.95. Gaps on charts fill about 90% of the time, which makes it likely Pinterest will rise up to fill the empty trading range in the future. If the stock does, it will represent a 13% increase from the current share price.
- If Pinterest closes the trading day with an upper wick, the stock will print a shooting star candlestick, which could indicate a further retracement lower is on the horizon. If Pinterest closes the trading day near its high-of-day price, the stock will print a bullish Marubozu candlestick, which could indicate higher prices will come on Friday.
- Pinterest has resistance above at $22.08 and $27.32 and support below at $19.04 and $16.92.
Photo: Nopparat Khokthong via Shutterstock
