Anytime you are investing/speculating/buying a stock that is in a downtrend, you are bucking the trend and it is much more dangerous to play a countertrend rally then to buy the trend. We are in a downtrend and there is no doubt about that. That being said, psychology makes herd mentality react in certain ways. You have the tulip bubble of 1637 which drove the price of tulips to unrealistically and unbelievably high prices only for the balloon to pop and prices to come back to reality. More recently we had the housing bubble of 2007-2008 which drove real estate prices to astronautical heights only to burst along with the stock market and nose dive. You can chart such psychological moves with indicators. The same is true with stock prices. The rubber band can be stretched too far in one direction or the other and will self correct to parity eventually. During the crash of 2008 you can see from the attached chart that the oversold nature of the market resulted in a capitulation bottom. While it is not fair to compare an uptrend chart with a downtrend chart or a penny stock to the DOW it does illustrate the example of oversold technical indicators that I referred to (weekly Stochastics, RSI, PPO, etc.) http://stockcharts.com/h-sc/ui?s=$INDU&p=W&yr=10&mn=3&dy=10&id=p55882395310&a=418514874&listNum=1
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