Technical Analysis of Stock Trends

The study of technical analysis of stock trends has assumed great importance in these days when stock market have become a stock trading heaven. The approach of stock trading is different from that of stock investing. While a fundamental analyst will consider the value and basic strength of the balance sheet, there are many technical analysts who give price targets on stocks based on the technical structure of stocks. Many ebooks giving info on technical analysis of stock trends in stock market are available which can help you know the basics. However, the concepts of technical analysis of stock trends given below will help in knowing the things better.

Characteristics of Technical Analysis

Observe the Moving Averages
Technical analysts carefully observe the moving averages of stocks to determine the stock trends. The twenty day moving average, fifty day moving average and two hundred day moving average of the stock price is carefully studied to determine whether it is in an uptrend or downtrend or is in a sideways zone. These standard moving average are used in almost all countries to study the stock movements and conduct a detailed stock research.

Identify the Support Levels
Technical analysis of stock trends involve identifying the support levels of stocks perfectly. Support levels on the technical analysis charts are those levels at which the stock price is believed to stabilize. So, this means that we are not expecting sudden change in the price of stock below the support price on the stock. So, this support level can be the best position to have as a stop loss for trading the stock with a long position. Many times, technical analysis does help to determine accurate and strong support levels, however in times of heavy selling in the stock market, these support levels may not work.

Identify the Resistances
When we talk about supports, we also need to discuss resistances for stock prices. On the technical chart,a stock has many resistances which it needs to overcome to go up. A stock can do so, only if, it is in a continuous uptrend. Intermediate uptrend can cause a sudden spurt in the stock prices but eventually, it is bound to come back to its original support levels. Strong news flow and good profits by the company can push the stock price above the resistances. Generally, when a resistance is crossed, it is followed by a huge rally and then a consolidation phase on the charts.

Volume Analysis
In technical analysis of stock trends, we cannot forget to talk about volume analysis. Volumes on various stocks denote the number of shares being traded. An increase in the volume of a stock can be an indicator of rising investor interest which can itself drive the stock price in either directions. Volumes are always considered by technical analysts to arrive at price targets. However, investors need to be aware of market manipulators who are known to increase stock prices artificially without any fundamental reason.

Technical analysis of stock trends are meant mostly for the short term traders who look for quick profits and then exit from their existing positions. However, all calls given by technical analysis cannot be hundred percent true as they are dependent on market conditions. A self stock research and analysis is equally important, apart from referring to the research reports and guidance manuals prepared by technical experts. Only experience and learning from one's mistakes can help become an expert stock trader. So, good luck and happy investing!