Trendlines

| October 12, 2010 | 5 Comments

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.

uptrend starhub trendline

The following chart of Chartered Semiconductors show a strong downwards trending stock.

downtrend chartered trendline

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Category: Charting Indicators

About the Author ()

John Tan has been Vice President of BlueTrust Investments Corporation for 6 years since the mid-90’s. He has since moved on, to be a professional full-time trader.

Comments (5)

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  1. jsoh78 says:

    nice n clear.. thanks!

  2. Vonn says:

    Good charting on starhub. Do u think as a blue chip, the starhub could be poised to go higher in the short term now that STI is starting to be laggard?

    http://sgsharemarket.com/home/2010/10/straits-times-index-at-20ma-support/

    • ProfitFan says:

      Short-term wise, starhub is definitely in a trend channel, but use of other indicators is needed. For now, buying at trend support and selling trend resistance would be a sensible strategy

  3. Donovan says:

    can you post an article to explain on the MACD and RSI? From what I know, when the MACD trend below the signal, it is a buy indicator and vice versa. When the RSI trend below 30%, buy and above 70%, sell. But what is the concept behind these? Thank you.

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