The Basic Indicators Checklist to Go Over Before Buying a Stock
Before buying any stock, you should pause and ask yourself:
What are the numbers telling me?
Technical indicators can’t guarantee success, but they offer powerful clues about a stock’s momentum, trend strength, and potential risk.
Here’s a simple but effective checklist of core indicators to review before making your next move.
✅ 1. Moving Averages (50-Day and 200-Day)
These are the bedrock of trend analysis.
- Is the stock trading above its 50-day and 200-day MA?
→ Indicates bullish momentum and strong positioning. - Is there a golden cross (50D > 200D)?
→ Often signals the beginning of an uptrend. - Death cross (50D < 200D)?
→ Caution: could be the start of a longer downtrend.
✅ 2. Relative Strength Index (RSI)
RSI measures whether a stock is overbought or oversold.
- 70+ = Overbought
- 30- = Oversold
- Ideal entry zones are when RSI is between 40–60, especially after a pullback.
If RSI is high but the stock is still climbing, it may still run. Just manage risk accordingly.
✅ 3. MACD (Moving Average Convergence Divergence)
MACD helps track trend momentum and changes in direction.
- MACD Line crossing above Signal Line = Bullish
- MACD crossing below Signal Line = Bearish
- Also pay attention to MACD divergence: when the stock price rises but MACD weakens, momentum may be fading.
✅ 4. Volume
Volume confirms the strength of a move.
- Price rising on strong volume = Conviction
- Price rising on weak volume = Possible trap or false breakout
- Look for volume spikes near breakouts or during reversals
Healthy stocks show above-average volume during rallies and lower volume on pullbacks.
✅ 5. Support and Resistance Levels
Know where the stock tends to bounce or stall.
- Support: Recent price floors—good entry points
- Resistance: Recent ceilings—may require strong volume to break
- Breakouts through resistance on strong volume can lead to quick gains
- Breakdowns through support can trigger sell-offs
✅ 6. Trendlines and Patterns
Manually draw key trendlines to identify:
- Uptrends (higher highs, higher lows)
- Consolidation zones
- Reversal patterns like double bottoms or head-and-shoulders
These visuals can help you time entries more effectively.
✅ 7. Sector and Market Context
No stock moves in a vacuum. Always ask:
- Is the sector in favor (e.g., semiconductors, energy, healthcare)?
- What is SPY or QQQ doing today?
- Are interest rates, inflation data, or macro news impacting sentiment?
If the broader market is pulling back hard, even strong setups can fail.
Sample Checklist Before Buying
| Indicator | Bullish Signal | Current Status |
|---|---|---|
| Price vs. 50D/200D | Above both | ✅ |
| RSI | Between 40–60 | ✅ |
| MACD | Bullish crossover | ✅ |
| Volume | Increasing on up days | ✅ |
| Support/Resistance | Near support | ✅ |
| Trend | Higher lows, strong pattern | ✅ |
| Sector | Outperforming | ✅ |
Final Thoughts
Before you buy any stock, take 5 minutes to run through this checklist. You’re not trying to find perfection—you’re looking for alignment.
When technicals, volume, and market context all point in the same direction, you dramatically increase your chances of success.
Great trades are planned. Blind buys are gambles.
