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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.


! My stock trend trading tip

NEVER try to enter long trade for stock in downtrend.


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