Asked by Anonymous

How do you know when is a low of the company share price at the top or bottom of the rising trend? (Should we predict using future trends or look at historical trends?

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  • Yeo Enk Loui
    Yeo Enk Loui
    Top Contributor

    Top Contributor (Mar)

    Level 6. Master
    Answered on 04 Mar 2019

    Hello there,

    Just want to use the simple idea of "support" and "resistance" as well as a simple illustration to answer your question!

    Lets look at the share price of Exelixis Inc. (EXEL), listed on the NASDAQ as an example:

    In layman term, think of a stock price movement like the motion of breathing. One has to inhale, take a deep breath; exhale, removing the air in your system before inhaling again. In a sense, that can be said for stock price movement as well! They have to increase gradually, decrease slightly, and increasing again - in short, the long term stock price rises as the price makes higher highs, and higher lows - as seen in the diagram above.

    One easy way (not exclusive or by no means is this completely true) is to draw a "trendline", to roughly determine where the next lowest point, or highest point will be at. If you are bullish on this stock, your goal is to enter/buy this stock when it is at its 'new low' ie: I should buy EXEL on 10th Nov and 24th Dec

    This is just a general guide but i hope this helps in helping you get a rough sense of how you know when is a high/low of the company share price.

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  • Gabriel Tham
    Gabriel Tham, Kenichi Tag Team Member at Tag Team
    Top Contributor

    Top Contributor (Mar)

    Level 7. Grand Master
    Answered on 04 Mar 2019

    For TA, we look at past prices in an attempt to "predict" future price movements.

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