What are Hot Stocks?
Hot Stocks are stocks that are high in demand because of the strong financial performance of the stock or simply because of an anticipation of Initial Public Offering (IPO).
The hype and anticipation around an IPO are generally high, drawing tremendous interest from the investors. They cause the demand for the stock to surpass its supply, leading to a significant rise in the price. However, hot IPOs are generally risky and suitable for speculators willing to take the risk to make short-term profits.
Other stocks can be in high demand because of their strong quarterly results and a high return to investors through dividends. For instance, the telecom and technology stocks were hot stocks during the stock market boom in the late 90s. However, the market changes every minute, and what is hot stocks today may not remain as hot tomorrow.
For those keen on making money through share trading, read on for some tools and indicators to help you identify some hot stocks to buy today.
How to Identify Hot Stocks?
Rate of Change
The Rate of Change (RoC) indicator measures the speed at which the price of a share changes in a given period. It helps you calculate percentage changes in stock prices between two dates. A spike in RoC reflects a sharp price increase, while a plunge in RoC reflects a fall in price.
Trading volume is another indicator of hot stock. High trading volume reflects the continued interest of traders in the stock, making it a hot stock to buy. A low trading volume indicates a lack of security interest.
The moving average convergence divergence (MACD) shows the relationship between two moving averages of stock prices. The indicator consists of two lines. The first line shows the difference between the two averages, while the other line functions as a trigger for buy and sell signals. When the indicator falls below the signal line, it is probably time to sell the share.
The Relative Strength Index (RSI) is a popular indicator used for identifying the bearish and bullish price momentum of shares. It has a reading from 0 to 100. When RSI moves above the horizontal 30 reference level, it indicates a bullish trend. However, the dipping of the indicator below 70 reference level is a bearish indicator.
All the above indicators used in conjunction with one another can help you identify the hot shares to buy today.