Start Learning Technical Analysis

In this first lesson of Technical Analysis we’ll review “Trends”. A trend represent a change in investor expectation. But it differ from support/resistance levels in that trends represent change, therefore support/resistance levels represent barriers to change.

According to the example picture, A rising trend is defined by successively higher low- prices. A rising trend can be thought of as a rising support level--the bulls are in control and are pushing prices higher.

Following picture shows a falling trend. A falling trend is defined by successively lower high-prices. A falling trend can be thought of as a falling resistance level—the bears are in control and are pushing prices lower.

Just as prices penetrate, support and resistance levels when expectations change, prices can penetrate rising and falling trend lines. Following example shows the penetration of Ceylon Tea Brokers PLC (If you look at GRAN history chart, you can see after a continuous falling trend, it move up to 162 from 87 -90 level. Therefore this technique can use to identify momentum) falling trend line as investors no longer expected lower prices. You can see how volume increased when the trend line was penetrated. This is an important confirmation that the previous trend is no longer intact.

As with support and resistance levels, it is common to have traders' remorse following the penetration of a trend line. Here Browns just after the long term trend line breakout prices were came down due to traders’ remorse.

In technical analysis main considering factor is volume. Even trend line crossed the long term falling or rising trend without volume support it should be neglected. Because volume mean demand. Since share market is a auction place demand is very important.

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