Trend in Technical Analysis
The trend is a primary concept in Technical Analysis. The trend can be defined as “The directional movement of a commodity price or a financial instrument”.
It can be classified into three categories in a market.
The chart above shows Silver chart uptrend.
What is a Silver Chart Uptrend?
Whenever the direction movement makes higher highs and higher lows it can be said as Silver Chart Uptrend. Consecutive peaks higher than the previous peaks is termed as “Higher highs”. The bottoms higher than the previous peaks is termed as “Higher lows”.
Generally, when the fundamental and psychological factors improve, it forms an Upward Trend. The Uptrend may last as short as a few weeks to few years depending on the source and duration of the driver.
It is termed as “Bull market” when the commodity market is in a long term Uptrend. There’s optimism in the market that the commodity price will raise higher. It’s advisable to buy commodity on dips, during this Uptrend.
Trend Line: The line connecting the higher lows and higher highs is called Trend line.
Resistance Line: “The higher highs” trend line is alternatively called as Resistance line.
Support Line: “The higher lows” trend line is alternatively called as Support line.
Buy every lower of trend line or nearby support line and expected Target will be a new high.
Lower highs and lower lows made by crude oil are in a Downtrend. When the crude previous peak is higher than the current peak, it is termed as “Lower highs”. Similarly, when the current bottom is lower than the previous bottom it is termed as “Lower lows”.
Crude oil that are making lower highs and lower lows are in a downtrend. Lower highs mean the crude previous peak is higher than the current peak. Lower lows mean the current bottom is lower than the previous bottom.
The following chart shows the downtrend in crude oil prices
The weakening of psychological or fundamental factors forms a downtrend. As discussed earlier, the downtrend may last for a few weeks to few years based on the source and duration of the driver.
When the crude is in a downtrend, it’s advisable to sell crude on bounces. There’s pessimism prevailing in the market that the crude could decrease more.
Bear Market: When the crude is in a long-term downtrend, its termed as “Bear Market”.
When we sell every higher of trend line or nearby resistance line and expected Target will be a new low.
The horizontal price movement that occurs when the forces of supply and demand are nearly equal is termed as “Sideways trend”.
Natural Gas that trade in a range is in a sideways trend. Natural Gas trading in a sideways trend trade between strong levels of support and resistance.
The following chart below shows the sideways trend for Natural Gas:
The equilibrium is almost maintained when Natural Gas is in a sideways trend. It is noticed that neither psychological factors or fundamental news influence don’t influence the Natural gas prices and the trend is formed. A sideways trend may last as short as few weeks to as long as few years.
Two major things to be focused on a Sideways trend:
It’s advisable to buy Natural Gas at support levels and sell at the resistance level.
Once the support or resistance is broken, take fresh position and target will be considered over all wedge of support resistance.