How I Used Simple Lines to Ride $HOOD Up 200%
A clear, easy-to-follow look at how moving averages helped me trade $HOOD successfully.
Did you ever wonder how traders catch huge moves in stocks without constantly worrying? Here's a simple secret: I use moving averages, easy-to-read lines that tell me when to stay in and when to get out. Let me show you how this works using my trade on HOOD, which surged over 200% in just three months!
Many of you have probably seen HOOD's dramatic climb this year. From its low at $30 on April 7, the stock soared all the way to $100 on July 2, before settling at $94 yesterday. That's an impressive run—more than tripling in price in under 90 days!
The chart below shows exactly how I followed this incredible journey.
On these charts, you'll see several lines called moving averages. I use five:
200-day (yellow)
50-day (purple)
20-day (red)
10-day (green)
5-day (gray)
I also draw trendlines and horizontal support/resistance lines—these give me additional clues about where the price might turn.
Back in early April, HOOD formed something called a "double bottom," a common chart pattern that often signals a big move is coming. When the stock broke above a key level (marked with a yellow arrow), I calculated a target of around $69 by late June. Clearly, HOOD exceeded my expectations by a lot!
Here's the best part: throughout the entire run-up, HOOD never dropped below the 20-day moving average. For me, that's the "line in the sand"—it means the upward trend is still healthy. HOOD didn't just stay above the 20-day line—it mostly hugged the tighter 5-day line, signaling very strong momentum.
How do I know when to stay in and when to sell?
My trading system has two straightforward rules:
Rule 1: The 20-Day Moving Average
I ask three simple questions:
Is the price above the 20-day moving average?
Is the 20-day moving average pointing up?
Are the shorter averages (5-day and 10-day) above the 20-day?
If all three answers are yes, I stay fully invested. If only one or two are yes, I become cautious. If all three are no, I sell.
Rule 2: Higher Highs and Higher Lows
As long as the price continues making higher highs and higher lows, I stay in the trade.
In HOOD's case, both rules kept me confidently in the trade for this entire run.
Now, you might notice the RSI and MACD indicators at the bottom of my chart showing "overbought" conditions. Typically, an RSI above 70 signals caution. But here's something crucial: "overbought" doesn't mean "sell immediately." Stocks can stay overbought longer than expected—and HOOD proved exactly that.
Lastly, I sometimes check Bollinger Bands (BB), another indicator.
Many traders use BB to trade reversals, selling when prices hit the upper band. But that strategy would have failed badly with HOOD, because the price just kept riding the upper band upward.
One final, interesting detail: yesterday, HOOD’s price dipped briefly, but if you look closely, you'll see it bounced neatly off the 5-day moving average.
That's the power of moving averages—simple lines that help you trade without fear or greed.
Happy 4th of July, and may your trades be confident and profitable!