Harshita Budumuru

Trends

A trend describes the general direction of the stock price. There are 3 types of trends: up, down, or sideways. An upward trend has a series of higher highs and higher lows. It is the reverse for a downward trend with a series of lower highs and lower lows. A sideways trend has similar amounts of highs and lows. Many believe that a stock will continue along the trend it is going in.

Support and Resistance

Many investors connect the highs and the lows into trend lines, also called support and resistance graphs. Stock prices are known to have trouble breaking past or going higher/lower than the support and resistance graphs. Therefore, if a stock did break past the resistance graph to a higher price point, investors believe it is a good time to invest as the stock price will continue to grow. On the other hand, if a stock dips below the support graph, it might continue to decrease so this is a good time to exit from this stock investment. 

Price Patterns

The shape that is formed between the support and resistance graphs are also studied and considered as price patterns. These price patterns give a lot of further information about when investors should enter and exit. The following is a list of existing price patterns:

Head and Shoulders: this trend has a high peak in between 2 smaller peaks. This suggests a bearish pattern which is likely to decline in price. 

Double Top, Double Bottom: this trend has a trough-shaped curve sandwiched between two peaks. This also indicates that the price is likely to fall after the second peak.

Ascending Triangle: this trend has an upper flat trendline with an ascending bottom trend line. This means that there is bullish pressure that is testing the resistance line. The opposite is true with a descending triangle that pressures the stick price to support the graph.

Tea Cup: the price trend resembles a tea cup, suggesting the price is likely to increase.

Wedges: both graphs are heading towards each other indicating a bullish run who’s price may rise in the future.

By understanding the basics of trends, support and resistance, and price patterns, you can start to apply technical analysis to your own investment strategies. As you continue to explore and practice these techniques, you’ll become more adept at identifying key opportunities and risks in the stock market. Stay tuned for more in-depth analyses and tips in our upcoming blogs. The Bullish Advisor thanks you for stopping by!