Price near ceiling of rising trend

Rising trends indicate that the company experiences positive development and increasing buy interest among investors. Stocks in rising trends signal a further increase within the trend channel.

When the price is near the resistance of the trend channel ceiling, there is a large downside to the trend channel floor. The stock may then see short term falling prices.

However, selling near the ceiling can be a poor strategy, especially in the long term. Selling stocks for a profit too soon is one of the most common mistakes investors make. The price of a stock in a rising trend often increases for much longer than many investors think it will. Long term investors would therefore generally be wise to keep the stock, even if it is near the trend channel ceiling.

Selling near the ceiling of a rising trend can also be a poor short term strategy. When the price is close to the ceiling, there are good chances of a break upward, compared to the situation when the price is in the lower half of the trend channel. A break upward will be a buy signal and indicate a steeper rate of increase ahead. Consequently it will often be right also for short term investor to keep a stock near the trend channel ceiling.

The choice will depend on the investor’s risk analysis. Price near the trend ceiling gives a good chance for a break upward, but also a great chance for an imminent reaction downward.

In Investtech’s analyses, stocks in rising trends are counted as equally positive regardless of whether the price is near the floor, near the ceiling or in the middle of the trend channel. A stock is classified as “near trend ceiling” if it is in the upper fifth of the trend channel.