Quality Trend Analysis

Quality Trend Analysis
By www.ProfitableInvestingTips.com

https://profitableinvestingtips.com/
investing-trading/quality-trend-analysis
Trend analysis is an effective way to
predict equity price movements. But, it
requires a good understanding of the
market and its movements.

And, for this tool to result in profits, it
needs to be applied to quality investments
trading on major exchanges and not
cheap penny stocks that are prone to the
“pump and dump” type of hype. We refer
to this as quality trend analysis.

Purpose of Trend Analysis

The reason to use this approach in investment
and trading is to predict future prices. The
rationale is that by finding a beginning or
continuing trend, an investor can buy and ride
the trend to continuing profits. And, when the
trend is about to reverse, this system helps one
decide when to sell.

The end game is always to gain profits
and avoid losses, which is why quality
trend analysis of strong companies that
are actively traded in high volume is more
reliable and profitable.

Objectives of Trend Analysis

When you use trend analysis your focus
will be short term, medium term, or long
term. Or it can focus on all time horizons
depending on if you are looking for short
term profits or getting into a long term
investment at the best possible price.

You can apply trend analysis to both rising
and falling market and to bull to bear
reversals and bear to bull reversals. The
objective is always to stay a step ahead of
the market.

Weekly Trend Analysis

Traders who are looking for profitable swing
trades will commonly employ weekly trend
analysis. They are not applicable to day trading
because they only summarize sequential weeks
but are ideal for those looking to capitalize on
trends that evolve over weeks and months.

They are the most commonly used chart for trend
analysis. These charts show a single point on a
graph, bar, or candle for each week represented.
By summarizing each week, these charts
average out daily trading “static” like when you
use important moving averages.

Seasonal Trend Analysis

Some stocks, like retailers, have seasonal peaks
and troughs in their businesses. Seasonal trend
analysis is designed to pick up on these trends
and predict associated price movements. This
approach typically works well for cyclical stocks
whose cycles are at least partly driven by the
calendar.

Ratio Trend Analysis

This technique fits well with trading based
on analysis of intrinsic stock value. Ratio
analysis looks at company liquidity,
profitability, and efficiency of its
operations. Ratio trend analysis follows
these issues over time.

Clearly, when a company’s financials are
getting steadily better, or worse, it is an
indication that the stock price will be
heading up or down over time.

Wave Trend Analysis

This method goes back to the 1930s
when Ralph Nelson Elliott discovered that
“fractal waves” existed in the market and
could be identified and used to predict
price movement.

He gained fame in 1935 when he
predicted a market bottom that (for others)
seemed to come out of nowhere. As with
other methods, this tool can be used for
up-trending and down-trending markets
and well as for market reversals.

Trend Analysis Formula Example

A simple example of trend analysis is to
look at company profits over several
years. The process starts by picking a
base year and then comparing all
succeeding years to the base.

This can be done directly or as a ratio.
Amount of change = Current year
amount – Base year amount
Percent change = (Current year
amount – Base year amount) ÷ Base
year amount

The key to any formula is that you need to
be using meaningful numbers and only do
quality trend analysis instead of working
with inadequate or misleading data!

For more insights and useful information
about investments and investing, visit
www.ProfitableInvestingTips.com.

Quality Trend Analysis

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