Let’s take a real quick look at how to very easily, very quickly get an idea of where a stock is “trending”.
Many have tried their hand at a SNAP buy here or there, but it would have taken a fairly qualified trader to have achieved a good trade in SNAP.
Being able to determine which way a stock is trending is the most basic analysis one can do. Is the stock going up, down, or sideways.
Take a step back from whatever chart you are trading short term, and look at the whole picture of a stock’s life on the market. Even if you are conducting a short term trade, you need to be aware of the bigger picture, because it can and does effect how prices will trend in the stock.
There is a ton more to say on this but the point is to keep it simple. I can’t stress enough to you how important that concept will be to your trading. Do not over complicate things.
Lets take a look at SNAP with no lines.
What would your analysis be here on the trend or trends of this stock?
Think about it before moving on.
Of course smaller trends are always occurring within bigger trends, so looking for potential changes in the making is very much encouraged. When looking for the main trend though, look at the bigger picture and use basic trend lines to guide your analysis
Here is the SNAP chart with lines.
There is what I think of SNAP, based on a most basic and simple analysis of prices.
Prices trended lower from IPO, found a bottom, and now trend is flat, or sideways.
From there if we simply make a mid point of the sideways trend, we can see there is some reaction to price there. Prices have came from below to middle, from middle to top, and back to middle. This could be a place for a trader to take a position and see if prices have a positive reaction to the middle, or stop out for small loss and see if the stock goes back to the lower support line of the sideways trend, and try it again there. Or you could buy the break of the high point of the sideways trend, but that is my least favorite as it places your entry the furthest away from the exit, depending on your trading style.
As you can see, just a real basic and simple trend analysis can help traders define better price levels to take actions, as opposed to cramming 50 indicators on top of price.
Food for thought for the new traders and investors out there.