Bear stock market chart analysis
How to do best stock market trades
in downtrend?
Bear stock market is reality. There is not bull stock market situation only. Every investor and trader should be prepared for bear stock market trend declines.It is common that stock market moves are not only in one direction. There are corrections in every major stock trend. So it is important to do regular
stock market trend analysis.
Such technical analysis of stock charts will provide you important info about actual prevailing
stock market trend.
Long term investors are also often surprised that there is something like bear stock market situation. They often think only about rising prices. But as
historical stock market charts
present, there are also times when market is in declines. And it is good to know that there is also
stock market crash
possible. And it happened several times already. Therefore I recommend to be more active investor and do not buy and hold only for long term. And usage of
protective stop loss
technique is something which should be integral part of stock trading or investing business plan.
How to make best stock trades
during declines ?
There are two major trend moves. Bear stock market trend -
downtrend
- and bull stock markets trend -
uptrend.
Sometimes I hear about secular bear market. I do not know if it is so important to know if we are in secular negative market or current decline is only temporary. What is important for me is that we are in negative market trend situation. Why ? Because then I have defined major trading direction. The major recommendation is that when
stock chart analysis
tells you that we are in bear market, then it is not very good to be brave and buy a lot of shares. Preferable type of trading is short selling.
How do you recognize bear market situation ?
What is major stock market lesson & plan for such scenario ?
There are always bear market somewhere. It is possible to find stocks, sectors or regions that are in bearish trend moves also in times when general stock market indexes are in bullish situation.How do I define bearish situation ? Quite simply. I use two major
moving averages,
50day and 200 day moving averages, to define situation. When the price of analyzed instrument moves below both these averages, we are in bearish situation. The best stock trade strategy in such instrument is to expect further declines, i.e. to do
short selling.
Here are examples of downtrend in some stocks. As you can see these stocks moved into negative i.e. short selling territory, much sooner then global SP500 index.
These shares were candidates for short selling and for more declines already in times of quite bull or neutral US stock market.
Best stock trade advice for bearish situation
As I mentioned there is always some stock or sector that is in bearish situation. It is good to trade both directions , uptrend moves and downtrend moves too. Fear is much stronger emotion then greed and when decline starts then such move can be quick and huge.So my major stock market trading tip is to look for both types of possible trading trends, uptrend and also downtrend and trade them accordingly. As you can see on the chart below, as shares of RCL entered negative - bearish - territory, then the only correct direction of trade was short sell.
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