Different types of trends in Technical Analysis charts and Their Uses
Trends can be classified into three types:
- Sideways/Horizontal trend
Uptrend In Technical Analysis Chart:
When a particular stock is making higher highs & higher lows, that stock is considered to be in uptrend. Higher highs indicate that the stock is making consecutive peaks than previous highs. Higher lows indicate that bottom is higher than the previous lows.
When stock is in uptrend, it is advisable to buy on dips. The optimism is that the stock may rise further. The uptrend may last as short as few weeks or as long as few years.
As you can see from following chart, Nifty was in uptrend from Feb 2016 to Sept 2016
Technical Analysis Chart- Uptrend
The line which is connecting higher high & higher low is called Trend line. The higher high trend line is called resistance line and higher low trend line is called support line.
Downtrend In Technical Analysis Chart:
When the stock is making lower highs & lower lows, it is considered to be in downtrend. Lower highs mean that previous peak is higher than the current peak. Lower lows mean the current bottom is lower than the previous bottom.
When the stock is in downtrend, it is advisable to sell on bounces as there is pessimism that stock could fall further.
As you can see from following chart, JUSTDIAL was in complete downtrend since August 2014 to March 2016
Technical Analysis Chart- Downtrend
Sideways Trend in Technical Analysis Chart
When the sstock trades in a range, it is called sideways trend. Sideways trend occurs when the force of demand & supply are nearly equal. A sideways trend is also called ‘horizontal trend’
As you can see from the following chart TATACOFFEE was in sideways trend since July 2013 to July 2016
Technical Analysis Chart- Sideways trend
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