The stock price has a trend, and studying the trend line can guide us to invest, but what is the stock trend? What are the applications? Here is a brief introduction.
Because the trend represents the direction of market operation, we often combine the trend line to study and judge the support line and pressure line of the trend when analyzing the trend. The trend line indicates that when the stock price moves in a fixed direction, it is very likely to continue moving along this line.
In the downtrend, when the downtrend is broken through, it is a signal of incoming goods, and the downtrend line that plays a role in suppressing may become the support line for the later decline. Before being broken through, the downtrend line is the resistance line for every recovery of stock prices.
In the long-term upward trend, when there is a very high volume, it may be the signal of the end of the medium-term trend, followed by a reverse trend. At the end of short-term fluctuations in medium-term changes, most of them have very high trading volumes, with more peaks than bottoms. However, at the bottom of panic decline, very high trading volumes often occur. The rise and fall of stock prices are accelerating at the end of various trends. Therefore, the peak or bottom of the stock price reversal is far away from the trend line. The breakout of the trend line is often combined with the k-line pattern for comprehensive analysis. Before and after the breakout of the trend line, there will be some reversal pattern. Form and trend line can mutually verify the reversal of trend and improve the probability of successful decision.
Next, we will make a comprehensive analysis of the three forms and trends of the K-line: head shoulder top form, rectangular form and bell mouth form.
1. Confirmation of the head shoulder top pattern and the trend reversal below the rising trend line: the head shoulder top pattern belongs to a top pattern. At the end of the rising trend, the head shoulder top pattern appears. When the stock price falls below the rising trend line and then falls below the neck line of the head shoulder top pattern, the end of the rising trend is jointly confirmed, and the stock in hand should be sold in a timely manner.
2. Confirmation of rectangular form and trend reversal below the rising trend line: the rectangular form belongs to a sort out form. At the end of the rising trend, the rectangular form appears. When the stock price falls below the rising trend line and then falls below the lower trajectory of the rectangular form, the end of the rising trend is jointly confirmed, and the stocks in hand should be sold in a timely manner.
3. Confirmation of bell mouth shape and trend reversal below the rising trend line: bell mouth shape belongs to a sort of finishing shape, and bell mouth shape appears at the end of the rising trend. When the stock price falls below the rising trend line and then falls below the lower trajectory of the bell mouth shape, the end of the rising trend is jointly confirmed, and the stock in hand should be sold in a timely manner
Next, let's understand the effectiveness of breaking through the trend line. Breakthrough of the trend line indicates the change of the original trend, which is the reversal of the trend or the change of the trend rhythm, but often there will be false breakthroughs in the breakthrough of the trend line. Now let's study and judge the effectiveness of share price breaking trend line through four points.
1. Breaking the trend line of the closing price is more important than breaking the highest or lowest price in the day. Generally, the closing price shall prevail.
2. After breaking through the trend line, the farther the price is from the trend line, the more effective the breakthrough will be. It is generally believed that the breakthrough range is at least more than 3%
3. After breaking the trend line, the longer the price stays on the other side, the more effective the breakthrough will be. The median line is generally at least 3 days.
The application principle of breaking trend line:
The principles for judging the effective breakthrough of the trend line include the price principle. It is generally believed that after the breakthrough, the price will continue to rise or fall by 3%. At the same time, referring to the time principle, that is, the price will continue to hover outside the trend line for three trading days, which is an important signal of the trend turning. With this as the standard, we can avoid most false breakthroughs. At the same time, it should be noted that a new upward trend line may be formed after the original upward trend line is effectively broken through. A new downtrend line may be formed after the original downtrend line breaks through.
Advantages and disadvantages of using trend lines:
Advantages: It can seize some big opportunities in the market.
Disadvantages: The stock price or index has risen for a long time before the rising trend, and has fallen for a long time during the falling trend. In addition, even if the breakthrough conforms to the price principle and the time principle at the same time, there may be false breakthroughs, but the probability is small.
