Trends

The trend is one of the most important indicators of technical analysis. According to technical analysis theory, stocks that are in rising trends will continue to rise, and stocks in falling trends will continue to fall. Investtech’s research shows that this theory is correct.

This makes it very important to identify whether a stock is in a rising or falling trend. It is also important to recognise when trends change, in order to get out early in the case of a falling trend and get in early in the case of a rising one.

The trend is a simple indicator to follow. Every day Investtech’s systems identify the qualitatively best trend for each stock. Stocks in rising trends should be bought and stocks in falling trends should be sold.

Buy and hold stocks in rising trends

Sell and stay away from stocks in falling trends

Stocks in sideways trends can be bought near the trend floor and sold near the trend ceiling

Main principles

The bottom line of trend analysis is simple: The trend is your friend.

Buy and hold stocks in rising trends.
Sell and stay away from stocks in falling trends.
Stocks in sideways trends can be bought near the trend floor and sold near the trend ceiling.

Warning signals

Price near trend floor indicates greater upside, but also greater risk of a break downward.
Price near trend ceiling indicates a smaller upside, but also a greater chance of a break upward.

Trend breaks

It may appear that a stock should be sold when it breaks downwards from a rising trend. However, this often simply signals that the stock is taking a small break and will continue upwards soon. The following applies when assessing trend breaks:

High volume strengthens a break and signals a possible trend reversal.
Low volume indicates that the stock will soon continue in the same trend direction.
For rising trends: break below previous bottom signals a reversal downward.
For falling trends: break above the previous top signals a reversal upward.

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