Understanding Stocks

LET’S GET TECHNICAL: INTRODUCTION TO TECHNICAL ANALYSIS 113
ERICY Weekly
Volume
Uptrend
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Figure 11-4 Downtrend
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A stock that is moving higher and has been for a while is in an uptrend.
To create an uptrend, draw a line along the bottom of the chart in such
a way that you connect at least two points. Many short-term traders like
to buy stocks that are trending higher. (Instead of buying low and selling
high, traders might buy high and sell higher.) Just as in a downtrend,
traders will look at volume to help determine whether the stock
is a good buy. After all, if a stock is moving higher on increasing volume,
a lot of people are buying it. Figure 11-5 shows a stock index in
an uptrend.
Figure 11-5 is a weekly chart of the Dow Jones Industrial Average.
As you can see, although the index didn’t move up in a straight line,
the trend is still up. This is obviously a very positive sign if you are a
buyer. The challenge, of course, is determining how long the uptrend
will continue. Given this chart, since there are signs that the uptrend
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