Smartstockz

[december]

Use the stock chart to identify the current trend. A trend reflects the
average rate of change in a stock's price over time. Trends exist in
all time frames and all markets. Day traders can establish the trend of
their stocks to within minutes. Long term investors watch trends that
persist for many years.

Trends can be classified in three ways: UP, DOWN or RANGEBOUND.
In an uptrend, a stock rallies often with intermediate periods of
consolidation or movement against the trend. In doing so, it draws a
series of higher highs and higher lows on the stock chart. In an uptrend,
there will be a POSITIVE rate of price change over time.

In a downtrend, a stock declines often with intermediate periods of
consolidation or movement against the trend. In doing so, it draws a
series of lower highs and lower lows on the stock chart. In a downtrend,
there will be a NEGATIVE rate of price change over time.

Rangebound price swings back and forth for long periods between
easily seen upper and lower limits. There is no apparent direction to the
price movement on the stock chart and there will be LITTLE or NO rate of
price change.

Trends tend to persist over time. A stock in an uptrend will continue
to rise until some change in value or conditions occurs. Declining
stocks will continue to fall until some change in value or conditions
occurs. Chart readers try to locate TOPS and BOTTOMS, which are those points
where a rally or a decline ends. Taking a position near a top or a
bottom can be very profitable.

Trends can be measured using TRENDLINES. Very often a straight line
can be drawn UNDER three or more pullbacks from rallies or OVER
pullbacks from declines. When price bars then return to that trendline, they
tend to find SUPPORT or RESISTANCE and bounce off the line in the
opposite direction.

A famous quote about trends advises that "The trend is your friend".
For traders and investors, this wisdom teaches that you will have more
success taking stock positions in the direction of the prevailing trend
than against it.

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