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12/01/2022

Market trends on the stock market

Market trends, or the secret to successful forecasting

Technical analysis of the recent evolution of a stock or index can help to identify its short and medium term trend. It is thus a useful tool for stock market trading. The different ways to forecast stock market trends. The stock market is constantly changing, alternating between an upward movement one day and a downward movement the next, and it is often difficult to anticipate the trend simply from day-to-day reading of a stock's price and its evolution compared to the day before (or even its "intraday" variations, during the same trading day).

Investors therefore rely on either fundamental or technical analysis. Fundamental analysis studies the data published by a company to detect the bullish potential of a share (or on the contrary its bearish risk). It is an economic analysis (profitability of the company, positioning on a buoyant market or not, exposure to geopolitical hazards or not) which is relevant over the long term. Technical analysis follows a completely different approach : it consists of studying recent variations in the value to detect the underlying trend and predict its evolution in the short or medium term. This method is favored by the most active investors, who multiply the back and forth in a trading perspective.

Graphical analysis, or trend prediction based on price curves

Graphical analysis uses past price curves to anticipate the trend, looking for indicators of a reversal. For example, a W-shaped curve (with a first low point, a return to the initial price, a second low point equivalent to the first and a rise) is the signal of a probable bullish reversal. Conversely, the so-called head and shoulders pattern (a minor high, a retracement, a major high, a retracement, a new minor high equivalent to the first) indicates a probable bearish reversal. There are many other patterns, the appearance of which in the charts can be monitored to detect upcoming trends.      

Statistical analysis, or the future of a price interpreted according to values Statistical analysis is based on the study of the figures relating to the quotation to predict the trend to come. The study of the 50 and 200 day moving averages and their evolution will allow you to draw a line indicating an upward or downward barrier: the crossing of this symbolic line at a point is often the signal of a trend reversal (bullish rebound after a decline for example).

Statistical analysis allows us to predict the prices that can be reached if the same movement continues, and the barriers that will give a sell or buy signal. The trend can thus be anticipated by technical analysis, an essential method for those who want to understand the stock market by going beyond the simple observation of the closing price on a daily basis.

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