Downtrend
You as a stock trader will want to identify stock in downtrend to find possible candidates for short trades. I look for these indications on a stock chart during stock trend analysis to identify downtrends: - Price is declining
- Corrections (pullbacks) are not as strong as moves down
- There are lower highs (LH) and lower lows (LL) on the chart
- Volume during declining periods is higher than during corrections
Note them all on this example of a stock chart:
You can use
moving averages
to obtain additional hints for to reading a stock chart with a downtrend easier. - Important 50EMA works as declining
resistance
which stops any rising correction during a downtrend.
- Both averages are in correct order for a downtrend; shorter 20EMA is under a longer 50EMA.
! My stock trend trading tipNEVER try to enter long trade for stock in downtrend.
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