Trend Lines – Good Areas to buy Stocks

Trend Lines are good study tools to judge the price movement of a share over a period. A series and high and lows are identified by connecting them appropriately. The scheme for stop loss is ingrained in the chart showing the Trend Lines. With the cursory glance from the chart it is possible to know whether the stock market is trending higher or lower. While trend remains solid, with fewer swings, it denotes a rally and an investor can look for uptrend lines to establish new positions.
Technical analysts constantly watch the uptrend and downtrends to establish the reasons there for, and the factors contributing for particular type of swing in the market conditions. The resulting line, which is generally updated on daily basis, gives the trader a reasonably good idea about the direction of the movement of different shares in the portfolio of a client. This chart turns out to be a good tool, not only of the past history of the movement of the share, but also the possible indicator to make a successful trade.

Interpretation of Trend Lines

The data provided by the Trend Lines is unquestionable. It gives the clear picture whether the market forces are in your favor or not. When the Trend Lines are on the downward march, it indicates the excess supply of the shares and the investors are in a mood to sell the shares than show willingness to buy. That cautions an investor against the move to hold on to a long position. Gain in that context is unlikely when the long-term trends persist with the downward movement. This is the time for critical examination whether to hold on to the share or withdraw it from the portfolio. An uptrend suggests favorable conditions and an increased demand for the asset than the supply resulting in additional incremental value of the asset. Stop-loss orders are constantly watched by the traders as per the indicators in the Trend Lines. They are mostly moved higher as the Trend Line gears to slope upward. The trader sees an opportunity to lock in as much profit as is possible without withdrawing from the position too early. Relocate the stop loss order judging the possibilities of fluctuation levels. Ascending Trend Line is a good guide that is most likely to tender profitable trades.

Trend Lines help for entry and exit

With the picture before you about the overall direction of a given asset, the areas of support and resistance are identified. Trend Lines provide definite indications through the chart how the price of a share has problems in moving upward, which again is a pointer to the difficulty the particular company/industry might be facing. The entry and exit levels can be coolly decided with due respect to the clues provided by the Trend Lines. The relationship of the stop loss orders and the Trend Lines is also very intimate.
Trend Lines only impel and do not compel an investor to take the particular decision. It is an issue for the judgment of the concerned individual. The picture of the Trend Line in the chart may be a short term direction of the price of an asset. Several scenes are possible. The price may bounce to revert to the original level; it may continue to increase, it may remain constant in which case the Trend Line may move flat. This shows whether the trend is strengthening, weakening or remains constant.

Conclusion:

Trend Line is yet another technical signal which is in vogue in the stock trade. It is no substitute to the judgment of the trader; it is just an assisting tool. Common agreement about the interpretations of the data of the Trend Line between the two traders is unlikely. But the traders are aware of the strategic advantages Trend Lines provide for short term and long term trades. This is an invaluable permanent data available in the records of trader relating to shares and a good reference tool.