Uptrend

Note that trends are not a straight line, but consists of minor movements which create peaks and valleys. If the price is steadily moving upwards over a period of time, the trend is said to be rising, or an uptrend. An uptrend consists of each new peak being higher than the previous one. The same must be occurring for price dips, “valleys”, within the uptrend. Each should be rising. Note that uptrends require the majority of price bar’s closing values to be both higher than the close preceding it and above the open.

The last sign involves support and resistance. Since each peak and valley are sequentially rising, support levels revealed by any set of valleys and resistance levels shown in any set of peaks should also be rising. Trend lines should be slanting upwards and channel lines should be rising. If price breaks a support level, trend line, or channel while moving downwards, the uptrend might end.

Note that the existence of valleys mean that every day will not always be higher than previous days. This makes higher valleys an important confirming signal for an uptrend. The uptrend must have higher peaks and higher valleys. If you only have one of the two, making long side investment decisions is extremely risky.

If a peak is below a previous peak, look at the lows. If the next low is also lower, the uptrend may be over.  The same works in reverse, a valley below previous valleys should make you watch the next high’s position to see if it is also lower. Note a single lower peak or lower valley won’t necessarily reverse an uptrend, but can stall it or turn it into a consolidation.

As a final note, you should see uptrends as a relation of supply and demand. The uptrend will end when demand from buyers is finally balanced, and eventually exceeded by supply from sellers. At that point the uptrend will consolidate if balanced, and reverse if demand is exceeded.

Swing Low Triggers

Swing Lows occur when price falls into an area, turns, then moves up. This forms troughs in uptrends or downtrends. Troughs are entries in uptrends, providing a cheap place to buy into the trend before price turns further upwards. Troughs are exits from downtrends, providing a good place to buy out of short sales cheaply before price turns up. In a consolidation area, purchase opportunities appear during swing lows.

In an uptrend, swing lows inside confluence zones trigger an entry to the long side (a long purchase).