Falling trend breaking downwards

Falling trends indicate that the company experiences negative development and that buy interest among investors is declining.

Falling trends indicate that the stocks will continue to fall. Trends often last for longer than investors think they will, and thus many buy a stock too soon. If you own a stock in a falling trend, you should normally sell it. If you are looking to buy stocks, you should stay away from stocks that are in falling trends.

A falling trend breaking downwards signals increasing sales interest among investors. This can be triggered by fundamental aspects in the stock or by media or stock brokers focusing on the company, making more investors aware of the dangers and challenges the company faces.

A break downward is often the beginning of a continued fall, at an even steeper rate.

Special circumstances

In some rare cases, especially if the trend has lasted for a long time and the volume is unusually high, a break downward can signal a sell-off: everything looks negative and every investor wants out. This makes the price fall straight down, while the last investors sell. If the price rises again on high volume, it signals a clear mood change among investors. It is a warning sign of a potential reversal upward.

Nevertheless, the main rule is that a break downward from a falling trend is a negative signal.

In Investtech’s analyses, a stock in a falling trend and a stock that has broken downwards though a falling trend will both be equally negative, given they are otherwise identical.