How to evaluate a trend using a Stock Chart

If someone asked you today, “Is the stock market in an uptrend, downtrend or a lateral consolidation”, what would you answer?  Knowing the answer to this key question is important for the stock market or even an individual stock.  Why?  If you buy a stock (go long) in an uptrend you are more likely to make money on it.

There is a simple way to see for yourself if the market is heading upwards or downwards.

First let’s examine what types of trend exist:

Types of stock price trend:

  • Uptrend: The stock or index is moving up, making new highs or higher highs
  • Downtrend: The stock or index is moving downwards making lower lows
  • Sideways consolidation: neither making significant new highs nor new lows

There are also time-frames to consider in evaluating a trend, for this we will refer to Charles Dow’s classification.

Types of stock trend time-frames:

  • Short Term: Days to weeks
  • Medium Term: Weeks to months
  • Long Term: Months to years

By combining the above terms, you could be specific about the market trend.  For example you could say the market is in a short term up-trend, but a long term down-trend.  But isn’t that contradictory, the market being in both an uptrend and a down trend at the same time?

Not really it makes perfect sense.

To learn more about performing accurate stock trend analysis take a look at our 5 Star rated training course.


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