Trend is defined as "A general direction in which something tends to move". In technical analysis, a trend is a series of higher highs and higher lows, or lower highs and lower lows.

 

Up Trend: A series of higher highs and higher lows. It looks similar to stairs going up.

 

Down Trend: A series of lower highs and lower lows. It looks similar to stairs going down.

 

Change in trend direction: A change in trend direction occurs when buying or selling pressure reverses causing a break in a trend line.

 

What causes a trend: Lower prices induce buying and higher prices induce selling. Buying pushes prices up until some sellers can't resist taking profits. As selling volume increases, other sellers fearing losses of their profits join in, causing a rush to sell, pushing the price back down. Then, the buyers come back in to buy on the dip causing the price to rise again. If there are more buyers than sellers, you will have an up trend and if there are more sellers than buyers, you will have a down trend.

 

Lack of a trend: When prices are moving sideways, there is no trend. For practical trading purposes, a highly volatile market is not trending (up, down, up, down, etc.)

 

Drawing trend lines: Trend lines are drawn accross the first two points of a trend and then adjusted as the trend moves.

 

 

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Where is the NASDAQ going?

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November 3rd There was a powerful bounce off the support. This created a double bottom. The November candle is now touching our old trend line, but the old trend line should be adjusted to touch the top of the September candle. That would move it a little to the right.

November 13rd The support was broken. Notice the 1998 correction and how the market dropped about 30%. We are not too far away from a 50% drop as of this date.

December 1st starts the month with a higher low. This causes a change in trend direction.

If you Can't immediately understand the various principles presented in this newsletter, it is suggested that you enter a training program (such as ours, of course) or read the necessary books to develop these skills. If you trade in opposition to equity and market trends, you will most likey lose your money. Remember, your money is counting on you!!!