The Trend Bible

Research Results – Breaks Upwards and Downwards from Trends

Stocks in rising trends breaking upwards have continued upwards, and at a stronger rate of increase than before. Stocks breaking downwards through the floor of a falling trend have seen strongly negative price development.

Research Results – Breaks Upwards and Downwards from Trends

Figure 1: Breaks in the trend direction. Average price development for stocks breaking upwards through the ceiling of rising trends and downwards through the floor of falling trends in Investtech’s medium long term technical charts.



 

Figure 2: Breaks opposite of trend direction. Average price development for stocks breaking downwards through the floor of rising trend and upwards through the ceiling of falling trend in Investtech’s medium long term technical charts.



 

Relative return, rising trends and breaks Norway Sweden Denmark Finland Weighted average
Breaking upwards from rising trend 4.7 ppt 2.8 ppt 2.6 ppt 1.1 ppt 3.3 ppt
Within rising trend 2.3 ppt 1.5 ppt 2.3 ppt 0.2 ppt 1.8 ppt
Breaking downwards from rising trend 0.4 ppt 0.4 ppt 1.1 ppt -0.6 ppt 0.4 ppt

Relative return, falling trends and breaks Norway Sweden Denmark Finland Weighted average
Breaking downwards from falling trend -7.8 ppt -6.3 ppt -9.9 ppt -5.6 ppt -7.3 ppt
Within falling trend -3.2 ppt -2.0 ppt -4.9 ppt -2.0 ppt -2.8 ppt
Breaking upwards from falling trend -0.2 ppt 0.3 ppt -1.1 ppt 1.3 ppt 0.0 ppt

ppt: percentage points

The charts and tables above show that stocks in rising trends with breaks upwards continue to rise with a stronger rate of increase than stocks within rising trends. Stocks with breaks downwards from rising trends have also continued upwards, but at a rate of increase clearly weaker than stocks within a rising trend and only barely above the market development.

Stocks breaking downwards through the floor of a falling trend have seen very negative further development with a fall of 7.3 percentage points more than benchmark for the weighted average of all the Nordic signals. This is clearly weaker than stocks within a falling trend. Stocks that have broken upwards through the ceiling of a falling trend have developed neutrally compared to the marked in the coming period, which in absolute number gives a rise of 3.5 per cent in the next three months.

The above results fit well with technical analysis theory on breaks from trends. Breaks upwards have given rising prices and stronger rate of increase than earlier. Breaks downwards from rising trends have given continued rise but at a weaker rate of increase. Breaks downward from falling trends have given further fall at a stronger rate of decrease than before.

The results contradict the theory for one indicator: breaks upwards from falling trends. This has not given further fall, but instead an increase in line with the market.

 

The Trend Bible was written in 2016 by Investtech’s Head of Research Mr. Geir Linløkken. The research team behind the Trend Bible also consists of Senior Researchers Asbjørn Taugbøl and Fredrik Tyvand.

The Trend Bible - Start Page

Investtech has worked on research into behavioural finance and technical and quantitative stock analysis since 1997. The company has developed an analysis system that identifies trends, support and resistance, formations and volume patterns in stock prices, and uses these to generate buy and sell signals. Investtech uses advanced mathematical algorithms and statistical methods in computer programmes and online subscription services.

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Investtech guarantees neither the entirety nor accuracy of the analyses. Any consequent exposure related to the advice / signals which emerge in the analyses is completely and entirely at the investors own expense and risk. Investtech is not responsible for any loss, either directly or indirectly, which arises as a result of the use of Investtechs analyses. Details of any arising conflicts of interest will always appear in the investment recommendations. Further information about Investtechs analyses can be found here disclaimer. The content provided by Investtech.com is NOT SEC or FSA regulated and is therefore not intended for US or UK consumers.


Investtech guarantees neither the entirety nor accuracy of the analyses. Any consequent exposure related to the advice / signals which emerge in the analyses is completely and entirely at the investors own expense and risk. Investtech is not responsible for any loss, either directly or indirectly, which arises as a result of the use of Investtechs analyses. Details of any arising conflicts of interest will always appear in the investment recommendations. Further information about Investtechs analyses can be found here disclaimer. The content provided by Investtech.com is NOT SEC or FSA regulated and is therefore not intended for US or UK consumers.

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