Finance Within Minutes


Trends of a Stock

Trends play an important role to analyse a stock for buying or selling. These trends help us to identify on which track has the stock been in. Trends can help both investors and traders in deciding whether to buy or sell a stock.

The three types of trends are as follows:
1) Uptrend
2) Downtrend
3) Sideways Trend

1) Uptrend
Uptrend depicts a bull run for the stock. In an uptrend, the stock will create higher closing price and eventually the stock price will grow over a period of time – Week, Months, Quarter or Year. When the closing price of a stock is higher than the previous closing price and this continues over a period of time, it creates an uptrend for the stock.
For Eg: The closing price of a stock is 50,58,55,63,65,62,70.
Here the stock has shown an uptrend as the prices of high closing price keep on increasing as compared to the previous high.

Here is a line chart of Relaxo Footwears.
It shows the timeline for 6 months.

As we can see over here, the stock has been given higher closing points after each session without breaking the previous support. The lower closing points have ended above the previous support.

2) Downtrend
Downtrend indicates towards a bear run. In a bear run, the stocks will create lower lows. This means that the stock would create lower closing price as compared to closing price of the previous session. If the stocks go a bit high, it might be a correction. But in the future sessions, the prices will fall. The continuous bear run with lower closing prices compared to its previous sessions indicates a downtrend in the stock.

Here is a line chart of Bank of Baroda.
It shows the timeline of 1 year.

As we can see here, Bank of Baroda had hit a high of Rs 140. Since then, price has been falling. However, there was a consolidation phase during November to February but, the price kept falling down.

3) Sideways Trend / Horizontal Trend
A Sideways Trend stock indicates a consolidation phase for the stock. In this trend, the stock price touches its resistance and reverses back. Then, the stock price would go lowest to its support and then would again reverse back. In this way, the price sideways without breaking its resistance or support.

Here is the line chart of Tata Consultancy Services.
It shows the timeline of 1 year.

As we can see in the above chart. TCS has its support on 2000 and resistance at 2275. The price movement doesn’t break its support and resistance and therefore, indicating sideways trend.

So these were the three types of trends. They can help the investors for choosing the right stock for their investments over a period of time.

Thank You for reading.

Leave a Reply