What is a bullish stock? Whether you’re just starting out or you’re a trading veteran, you’ve probably noticed trading has its own lingo. You’ll hear terms like bullish, bearish, long, and short a lot, so it can be helpful to learn what they mean.

Bullish refers to:

  • An upward trend in the markets or a particular stock price.
  • Expectations that a stock’s price will go up.

Understanding terms like bullish trading will help you to explain your market opinion and communicate with other traders. It will also help put you on a path toward gaining a deep understanding of how markets work and how to make money trading.

Here, we explain everything you need to know about what it means to be bullish, as well as how to invest throughout the cycle of a bullish market to make the best returns. We’ll help you find the most bullish stocks.

What Is Bullish?

Traders use “bull” to describe an upward trend in a stock or in the markets more generally. Put simply, a bull market means stock prices are going up. So, if you hear that a stock is bullish, the analyst thinks its price is on the upswing. A bull trend is usually not just a momentary uptick but lasts months or even years.

“Bullish” can also refer to your expectations about how a stock will perform in the future. If you’re bullish on a particular stock or have a bullish view, you believe its price will go up.

Traders sometimes use the term “long” the same way as bullish. In other words, if you’re long, you expect prices to rise.

What is the difference between bearish and bullish? Bullish is usually held in contrast with bearish, which means the market or a stock price is on a downward trend. In a bear market, prices are declining. Being bearish also means you expect prices to fall. In other words, bullish vs. bearish sentiment refers to your expectations for a stock’s performance.

Bullish Long- vs. Short-Term Trading

Short-term trading refers to investments made over the short-term, perhaps for a few days or weeks. A short-term trader who is being bullish believes a stock price will go up over the next few days or weeks. This analysis could be based on intraday volume and price action or on analyzing stock charts.

For short-term traders, the underlying qualities of the company don’t matter as much. They are more interested in spotting near-term events that could cause a temporary price increase. For example, a trader could buy a company’s stocks in advance of its quarterly earnings announcement if he or she believes the company’s earnings will beat expectations, causing the stock price to go up in the short run.

Long-term traders, in contrast, usually make trades that stay open for months or even years. Long-term traders are less concerned with day-to-day market fluctuations and more interested in trends that last.

When long-term traders are bullish, they have favorable views of a company’s future. They might also believe the company’s current stock price is undervalued.

Tips for Trading in the Bull Market

If you’re planning to act on a bullish market, you must have a well-defined and tested trading strategy. Traders tend to take different approaches to a bull market in its early vs. late stages. There are also certain kinds of trades you can make across a bull market’s lifespan.

Check out some of our best tips for trading at every stage of a bull market.

Early Stage Bull Market Investing

If you think a bull market is beginning, investment approaches you can take include:

  • Looking for bargains.
  • Looking for strong fundamentals and appropriate industries.
  • Looking at a stock’s class.

First, look for bargains. The beginning of a bull market coincides with the bottom of a bear market. That means you have a better chance of finding shares that are near or even below their company’s book value. This means less risk when you acquire shares in a company that is generating positive earnings and growth in sales.

When you’re selecting stocks at the beginning of a bull market, look for strong fundamentals and appropriate industries. A company showing strong fundamentals will have solid sales and earnings, rising year over year or quarter over quarter. Also, consider whether you believe the company is selling a product or service that makes sense and is in public demand. This makes it more likely for the company to perform well long-term.

It’s also worth assessing which industries might be more likely to bounce back as the market picks up. As individuals, families, and organizations begin spending again, cyclical stocks such as housing, automobiles, technology equipment, and technology industries will see gains.

Finally, look at a stock’s class. Your choice here should reflect your risk tolerance: Some stocks are likely to be more aggressive choices than others. For example, you could decide to invest in a tried-and-true market leader, large-cap stocks, or get aggressive with a small-cap stock with better growth prospects but more risk.

Late-Stage Bull Market Investing

Once a bull market is in full swing, it’s time to start anticipating the late stages and eventually the end of the bull market. In anticipation, you can:

  • Go international.
  • Look for opportunities.
  • Watch for volatility.
  • Diversify your portfolio.

First, a late-stage bull market is a great time to go international. Some investors make the mistake of exiting stocks entirely at the end of a bull market. Diversifying your holdings by looking internationally might be a better strategy. This is in part because international markets often lag behind U.S. markets. So markets in places such as Japan and the EU could rally even as the U.S. market begins to stall.

Second, the end of a bullish market presents its own types of opportunities. Specifically, at this phase of the market cycle, the consumer discretionary and financial sectors tend to thrive historically, even as other sectors begin to decline. Look at opportunities in areas where high disposable income levels could lead to continued growth.

Additionally, the end of a bull market often presents an opportunity because the market tends to be more volatile in this phase. If you’re looking to add new stake in an expensive stock or take on new positions, the decline in prices could present a useful opportunity. Maintain a watch list of stocks you’re interested in acquiring, and get ready to seize an opportunity to do so.

Finally, the end of a bull market is the perfect time to prepare for the coming downturn. Don’t be tempted to over-leverage your investments toward a particular asset. Instead, maintain and expand your asset allocation mix, keeping in mind your long-term investment goals and the level of risk you’re willing to accept.

This is a good time to diversify into assets that optimize returns during a market downturn. Look carefully at defensive sectors such as health care, energy, utilities, and consumer staples that tend to weather bear markets better than other kinds of assets.

Investing Throughout the Bull Market

Some trading tips are useful regardless of which stage of the bull market you happen to be in, including:

  • Studying underlying companies rather than the movement of the markets.
  • Not following the herd mentality.

Study the Underlying Companies Rather than the Movement of Markets

It can be very tricky to predict markets’ short-term movement, whether on a day-by-day or weekly basis. Instead of trying to time your buys by predicting markets, it might make more sense to start by analyzing the underlying fundamentals of the companies you’re interested in, especially if you’re relatively new to the trading game.

Take a look at the company reports and technical charts of companies you want to invest in. Rather than trying to time your buy to maximize profit, start by investing in companies that have sound fundamentals and are likely to grow steadily over the long run. Once you’re a markets expert, you might be willing to take on more risk by trying to predict the day-to-day shifts of the market, but start out with a more risk-averse strategy to avoid losing money at the outset.

Don’t Follow the Herd Mentality

Investors sometimes get too excited during a bull market. They start passing around stock tips like hot potatoes, and stories of overnight millionaires begin to circulate.

Don’t jump on the bus of short-term trading in response to how you see others behaving, especially if you’re relatively new to trading. Chances are, by the time a tip reaches your ears, other investors have begun to take advantage of it, too. If you move too fast, you could end up having your earnings wiped out in a downturn.

Instead of trying to do what everyone else does, focus on longer-term trades and more risk-averse investments, such as midcap-based mutual funds, rather than taking on a great deal of exposure.

To learn more about how to make money investing in a bull market, schedule a free training session with one of RagingBull’s expert trainers today, or pick up a free copy of our investment handbook.

Author: Jeff Williams

Jeff Williams is a full-time day trader with over 15 years experience. Thousands of entry-level and experienced traders alike – day-traders and swing-trade small cap stock traders – credit Jeff with guiding them to turning small accounts into big accounts.

Jeff’s "Small Account Challenge" shows people how to transform accounts from a few thousand dollars into $25k, $50k or even $100k.

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