Capital Trend: The Most Fundamental Method to Look at the Rising Space of Individual Stocks

Many investors may find it strange that trading stocks depends on technical indicatorsKStable investors also need to consider the financial status, shareholder situation, corporate advantages, profit growth points, and other factors of the listed company, such as the line and form. So, what does this space refer to?

  
   

The space in stock market investment can be roughly divided intotwo typesOne is the space for stock price operation, and the other is the space for investment value improvement brought by industry growth.

It is common to hear investors say, "There is not much room for a decline in this stock, so I bought it.". In fact, this viewpoint is incorrect. Whether a stock has a large potential for decline should not be a reason to buy. Those stocks with upward potential are the goals we pursue. So, what kind of stocks have upward potential?

In terms of the operating space of stock prices, investors first need to judge from the rhythm of the rise. If the upward rhythm of an individual stock is very single, it is a smooth and straight upward trend, which is not conducive to the sustained upward trend of the stock. If a stock's rise maintains a rhythm of ups and downs, and there are continuous fluctuations and strong market adjustments in the middle, it is actually beneficial for the sustainable development of the stock market.

Secondly, judging from the perspective of quantity and ability, many investors mistakenly believe that the larger the trading volume, the better in a rising market, which is incorrect. Everything needs to be measured. If the volume can be too early or excessively amplified, it will cause excessive consumption of upward momentum, which can easily lead to unsustainable stock market trends. On the contrary, if the trading volume is moderately increased, the volume will not be excessively consumed, and individual stocks still have upward potential in the future. Therefore, the most ideal volume increase is during the initial stage of the market, where the volume can continue to increase gently. However, as the market enters a normal upward channel, the volume can slightly decrease and maintain for a long time.

Finally, from the perspective of the impact of hot topics on the entire market, cohesive leaders and leading sectors are the engines of upward trend. In a sense, it can be said that whatever kind of leading stocks there are, there will be what kind of upward trend. Leading stocks that have the potential for deep development, appeal, and facilitate large-scale mainstream capital inflows and outflows often have the potential for sustained growth, thus having greater upward potential.

In addition to the upward potential of stock prices, the investment value enhancement brought about by industry growth is also worth paying attention to, which is the basic condition to support the long-term improvement of stock prices. For value investors, although there are various valuation systems, they cannot do without the critical element of industry imagination space. Because only with the continuous expansion of industry space can enterprises in the industry be provided with a constantly increasing share of the cake, and enterprises can obtain space for rapid growth. For an industry with relatively limited space, it is equivalent to a cake with no change in share. Therefore, the growth of enterprises can only be achieved by grabbing the share of other companies in the cake, ultimately leading to price wars and other phenomena. This makes it difficult for the growth of enterprises to sustain, and the increase in stock prices will also be difficult.

The growth space of an industry is closely related to its lifecycle, and the position of the industry in its lifecycle constrains or determines the survival and development of enterprises. For example, before the birth of automobiles, the carriage manufacturing industry in Europe and America was once so glorious, but today, even the automobile industry has entered a stable period in its lifecycle. This indicates that if an industry enters a recession period, it belongs to the enterprises in that industry. No matter how strong their assets and management capabilities are, they cannot escape the fate of limited industry space. In addition, the market demand for industry products also affects the industry space. Rare goods are more expensive, and industries with a shortage of products are most prone to dark horses.

In short, investors need to choose the direction of investment through industry space and the timing of buying through price space, which is the most fundamental method of investing in stocks based on space.

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