Stock Rebound: Understand it and how to recognize it

Stocks have become a popular investment vehicle for many people today. Ranging from those who are just starting to become students to those who are retired, they are interested in learning and playing stocks. Either with the goal of making big profits or as an alternative to saving for other needs.

Well, when studying stocks, there are several terms that need to be recognized in order to maximize profits, reduce risk, and strengthen stock investing strategies. Among the many stock terms that need to be known, rebound is one of the technical terms that needs to be well understood by both investors and stock traders.

So what is a rebound in stocks?

Understand stock rebound

Rebound means rebound and is a term commonly used in basketball games when a player gets an unsuccessful rebound from another player.

Well while in the stock world rebound is a term to describe the moment after a bearish decline. So you can say that a rebound is an increasing state of a bounce.

Stock recovery is one of the indicators in stock technical analysis to describe an increase in stock prices after a correction. Stock rallies can happen in a relatively short period of time, for example, they only occur in 2-3 days.

The term rebound is always associated with bearish. However, without a downtrend or a softening in stock market conditions, there will be no recovery.

The occurrence of a bear market is usually seen by the decline in the overall stock index. If these conditions persist, investors will naturally consider selling stocks to avoid losses.

The decline in the stock market is usually influenced by economic growth slowing or decreasing compared to the previous year, the increase in the unemployment rate, the trade deficit and several other factors.

Stick rebound type

In fact, there’s only one type of stock rebound, and that’s technical rebounds. So called because technically, the stock’s movement actually bounces.

Comparable to a basketball that is thrown very hard on the ground so that the bounce is even higher. Technical rebounds typically occur in companies with discounted stock prices in the capital market.

The technical recovery itself is a short-term rise in stock prices after the stock price has undergone a drastic correction.

The concept of a technical recovery is that if a stock has fallen until it hits its support points or has been discounted, market participants/traders will re-buy the stock as the price is cheap, only to later sell it back when the price is back up is.

How to determine rebound and know its characteristics
When a stock is declining, there are two ways to analyze the rebound condition, namely:

Fundamental Analysis

Technical Analysis

Fundamental analysis can be performed by evaluating the issuer’s performance. If the issuer’s performance is good, the share price will also increase.

You can find out by comparing the company’s current earnings to earnings for the same quarter last year.

From the results of the comparison, you only have to calculate the percentage increase.

You must also assess that the company’s income gains are not due to the sale of assets or the profit factor from currency differences.

Technical analysis is the most commonly used method to determine a stock’s recovery.

In fact, not everyone can use it as it requires knowledge and experience to be able to use technical analysis.

There are several indicators that can be used, namely:

  • chandelier
  • moving average
  • trading volume
  • support and resistance
  • Overbought and oversold

Now that you know how to spot a stock rally, here’s how to identify the conditions for a stock rally. That is:

  • Normal Market Conditions. This means that the JCI is not experiencing sentiment affecting the market. Also, if the stocks start rising for 2 days, it means that the JCI is starting to recover.
  • The US stock indices rose significantly. As the Nasdaq, SP 500 and Dow Jones closed significantly higher, this could be a sign that the JCI will recover the next day.
  • JCI received positive sentiment after the price index fell sharply. This means that investors and traders can once again trust that they will buy more stocks that are already cheap. positive sentiments that may arise, for example the passing of a tax amnesty or the sentiment of disbursing the National Economic Recovery Fund (PEN), which is the government’s stimulant amid the current pandemic.

Tips for not missing out on stock rebound moments

There are situations when you can lose the moment to recover the stock. Here are tips you can do when this happens, namely:

1. Wait for the panic to pass

It’s normal for the stock market to fall when negative sentiment spreads. As a result, investors are panic selling.

So if the stock price falls below its usual price, be careful when buying the stock. Do not buy while still in a panic sell situation.

It is better to wait patiently and believe that the rebound moment will return. Usually, the moment is marked by the state of the market starting to reverse direction from red to green.

Well, if the situation is seen, it is a sign that recovery is about to happen. You can start looking at interesting stocks that you can collect at discounted rates.

2. Keep stock

You can also keep shares that you already own. Especially if you have large cap stocks with good fundamentals, also known as big cap stocks, which tend to be the fastest to recover after the Composite Stock Price Index (JCI) decline.

3. Always keep a reserve fund

Make sure you always have money left over that can be used for everyday needs. Pay attention to cash flow so as not to be disturbed when adverse conditions arise in the market. Because no one knows that stock market conditions will always be good.

In addition, a reserve fund can also help you buy some discounted stocks when there is a downtrend. So make it a habit to pay in installments when buying stocks when a bear market hits. Because you cannot predict how far the market will fall.

Don’t just buy stocks

When there is a bearish event (stock markdown), it can make people rush, or maybe you go crazy buying stocks without knowing their performance beforehand because you are tempted by the moment of recovery.

Even if you blindly buy stocks just because the price is cheap, you won’t make a profit, quite the opposite. Not recognizing the potential of the issuer whose shares were being bought, he was unable to recover.

So don’t just buy it, but also know the issuer whose shares are being bought to avoid consequential losses.

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