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Beginners Guide to Identify Multibaggers Stocks - Learn and Earn!

Updated: Aug 30, 2021

Most people think that becoming rich is a reserved privilege for Warren Buffett or Rakesh Jhunjhunwala.


Normal people like us often struggle to identify a proper investment technique and spend all our earnings on unnecessary things.


I am willing to bet that you will have many multi-baggers in your portfolio if you follow the Dow Theory concept for a few years.


How to pick multibagger stocks for investment


When it comes to investing, there are two schools of thought:

  • Fundamental Analysis and

  • Technical Analysis

Fundamentalists are more concerned about the company's management, various products, Sales, Price to earnings ratio, Balance sheet, Cash flow, Debt to equity ratio, etc. Broadly they are concerned about qualitative as well as quantitative aspects of the Company analysis.


Technical Analysts consider the analysis of past behavior of prices to interpret their study. They believe that the price contains all the information, and it's enough to analyze the price chart.


I belong to the technical analysis category. I will give a simple technique so that anyone can start investing immediately after reading this post.

 

Charles Dow wrote a series of Wall Street Journal editorials from 1900 until the time of his death. As per Dow, all market-related information – past, present, and even future is discounted and reflects on the charts.


As per Dow, market movements can be divided into three types, and at any time, the price is the combination of any of these three types. These three types are:


  1. Uptrend,

  2. Downtrend, and

  3. Sideways




Popular Topics


 

Uptrend


Uptrend as per Dow theory
Image 1 – Uptrend as per Dow theory

An Uptrend consists of series of Higher Lows (HL) and Higher Highs (HH) as shown in the above image. We can say, the price is in an uptrend until it keeps making HL and HH.


#ICICIBank chart showing an uptrend
Image 2 – ICICI Bank chart showing an uptrend

#BajajFinance chart showing an uptrend
Image 3 – Bajaj Finance chart showing an uptrend

Image-2 and Image-3 are the two examples of uptrend stocks.


Also read: 6 Trading Mistakes Every Beginner Should Avoid
 

Downtrend


Downtrend as per Dow theory
Image 4 – Downtrend as per Dow theory

A Downtrend consists of series of Lower Lows (LL) and Lower Highs (LH) as shown in the above image. We can say, the price is in a downtrend until it keeps making LL and LH.


#RCOM chart showing a downtrend
Image 5 – RCOM chart showing a downtrend