When buying a stock for the long term, it's important NOT to fight the trend. I.e. if you see that a stock is trending downwards (in otherwords, there's a downtrend channel or the price keeps dropping over time), then entering would incur a much higher risk.

A better way would be to identify companies that are trending upwards (a uptrend channel is formed, or the price keeps increasing over time). That way, the general trend is upwards, and you're going with the flow, instead of fighting against it. Check out my example of Starhub's chart to understand what I mean about a strongly upwards trending stock.

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Thank you Shifu !!
Shifu, can you also enlighten us on flag and pennant formation ! Thanks!

my pleasure!

will be doing some basic tutorials first...later gonna post one on support n resistance...will do flag and pennant after i cover the basics hehe

Thanks ! Please remember to teach on how to spot for flag post eh !

very nice basics......
i think my basic isnt there yet... then i go n see others liao
lol....

Hello thanks for the post. I just joined and am new to all these. THis is a great start. I have a question - does it mean to identify companies and their trends, we will need to track their performance over a long period of time (in your example, this easily more than half a year)?

yup, definitley. but usually stock charting software does this for you

My take is today STI may not be as bad as everyone thinks; may even be green. Sad that many still haven't got over the fear syndrome. I do agree that the credit crunch problem is not resolved yet but our market currently is cheap.

Remember the maxim: Buy on weakness; sell on strength. When everybody is not buying; good time to bottom fish for valued stocks by nimbling. I want to buy but not enuf funds as there are far too many stocks which I want to buy.

so how do you gauge whether a stock is worth holding ? by following the trend?

holding is subjective...it depends on a variety of factors, including how long your outlook is...3 months? 6 months? 1 year? 10 years?

Typically you should follow the trend until it reverses.