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.