Downtrend

You as a stock trader will want to identify stock in downtrend to find possible candidate for short trade.

I look for these indications on stock chart during stock trend analysis to identify downtrend:

• Price is declining
• Corrections (pullbacks) are not so strong as moves down
• There are lower highs (LH) and lower lows (LL) on chart
• Volume during declining periods are higher then during corrections

Note them all on this example of stock chart:

You can use moving averages to obtain additional hints for easier reading a stock chart with downtrend.

• Important 50EMA is working as declining resistance which stops any rising correction during downtrend.


• Both averages are in correct order for downtrend - shorter 20EMA is under longer 50EMA.