Actual value is only an estimate, and market psychology creates stock movement above and below the actual value. However, if the chart reveals that the price is still trending down, it is prudent to wait until the trend has clearly reversed itself before committing funds to the stock. However, you can continue to hold the stock as long as a steady up-trend is maintained. It could be years before the trend changes. The purpose of this short course is to give you a basic understanding of technical analysis.
All stocks are in one of four major stages, and it is vital to be able to identify each stage level.
A base is forming, but it can go on for months, or in some instances, even for years. Your money could be dormant for a long time thereafter. Now, the uptrend is beginning. The Moving Average usually starts ascending shortly thereafter, and the pattern becomes a buyer s dream. The next week you add the new reading, while subtracting the figure from 31 weeks ago.