Use the following scenario for questions.
TechStock has been in an uptrend for six months, rising from $40 to $80. The stock recently pulled back to $70 and is now trading at $72. The 50-day moving average is at $68 and rising, while the 200-day moving average is at $55 and rising. Volume during the pullback was below average, while volume during the initial uptrend was above average.
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Key levels: Resistance at $80 (recent high), support at $70 (pullback low), additional support at $68 (50-day MA) and $55 (200-day MA).
Both moving averages rising with price above both suggests a strong uptrend. The 50-day above the 200-day confirms bullish momentum.
Below-average volume during pullback suggests lack of selling conviction, indicating the pullback may be temporary and the uptrend could resume.
A high-volume break above $75 would suggest resumption of the uptrend, as it would break above the pullback resistance with conviction.
Stop-loss could be placed below $68 (50-day MA) or below $70 (pullback low), as a break of these levels would suggest the uptrend might be weakening.
