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Technical Analysis Trend Up
An uptrend occurs when stock prices trace higher highs and higher lows.
We can add a rising trendline to a chart by linking the low points. This is shown in the chart below.
Chart of a Stock in an Uptrend
Some trends continue for many months or years, others for days or weeks. We need an objective measure of the point at which a trend begins and ends.
As soon as we have two consecutive lows on a price chart we can join them to make an unconfirmed trendline.
For a trendline to be confirmed, and hence validated, the share price must respect it by rebounding from it a third time.
A buy signal is generated when the trendline is confirmed / validated.
Provided the share price stays above the trendline, we hold on to the stock.
We continue to hold until a sell signal is generated by a trendline break.
We then stay out of this stock until either a trendline break signals the end of the downtrend or, more conservatively, until a new uptrend is confirmed.