When it comes to trading penny stocks, you may have come across the terms bullish and bearish. These are two terms that are frequently used by traders to describe their opinion of a penny stock, as well as general market conditions. But where did these two terms originate from and what do they mean when it comes to buying penny stocks?
The Bull vs. The Bear
There are several different theories of where the terms “bull” and “bear” originated from. One of the most standard explanations stems from each of the animals’ methods of attack. For example, when a bull attacks, it first lowers its head before using its horns to drive its opponent into the air. Thus, a bull market can be defined as the market coming out of a low and rapidly rising.
Alternatively, bears attack by striking opponents downward with their paws, which defines a bear market as a falling market. Now that we have uncovered the origin of the bull and the bear markets, how are these terms applied when looking to buy penny stocks?
Bullish Penny Stocks
The term ‘bullish’ stems from the bull, which the saying does indeed apply, “if you mess with the bull, you get the horns.” The horns of the bull drive the price of a penny stock higher. If one is bullish on a penny stock, it is believed that the price of that stock will go higher.
Bearish Penny Stocks
The term ‘bearish’ stems from the bear that strikes downward with its paws and pushes the price of penny stocks down. So, being bearish is the opinion that the price of a stock will fall.
How To Determine If A Penny Stock Is Bullish vs. Bearish
Some traders rely on technical analysis. This includes chart patterns and technical indicators, to determine whether they are bullish or bearish on a penny stock. Technical analysis may not be your thing. There’s also fundamental analysis. This can be used to evaluate the health of a company by digging into its financials.
Penny stock news and corporate developments are another to pay close attention. This is especially true when looking at penny stocks to determine which side you’re choosing.