Technical Analysis Thursday: Stocks Are Chopping, But Not Breaking Down
The market has been a roller coaster this week, whipsawing this way and that.
At times like this, it’s important to look at actual charts to get a clear picture of what is happening.
In particular, there are three charts every investor needs to see today.
Chart #1: Stocks Are Moving in a Trading Range
The market is attempting to make us feel as though a lot has happened. But in reality, stocks are simply moving in a trading range (red rectangle in the chart below).
Put another way, there hasn’t been a decisive breakout either up or down. We’ve been chopping around, without actually going anywhere.
Chart #2: Reminiscent of Earlier Moves
In many ways, this week has been reminiscent of the way the market moved from early April to mid-May (blue rectangle in the chart below).
Chart #3: A Clear Trend at Play
It’s important to note that these kinds of chop-fests can occur within a trend. And once we put some trendlines on this chart, it is clear that despite all the volatility, stocks remain in a clear uptrend (green lines in the chart below).
Until stocks break down below that lower green trendline, the market is in an uptrend.
But you wouldn’t know that if you simply reacted to how stocks are making you feel. If you were to do that instead, you’d no doubt feel anxious and worried that something horrible was happening.
This is why I like looking at charts so much. Doing so can help you ignore your emotions and see things more clearly.
Editor, Money & Crisis