Seven Reasons Why The Trend Is Your Friend

Thomas Mullooly

Visitors: 355

We spend a great deal of time trying to spot stocks heading in the right trend, or direction. Careful attention needs to be given to the support and resistance lines. These lines are also called trend lines. Here are seven reasons why the trend can be your friend in investing:

1. These lines draw the general trend, or direction, the stock is heading. They’re not used for daily tracking, they’re more of a longer-term direction that the stock, mutual fund or commodity is heading. If you are using a longer term approach, the trend is what you really want to know, not necessarily the day to day wiggles in a stock.

2. Often times, the trend line will give you guidance in a stock for years, not just weeks or months. But these support and resistance lines are often bumpers, or guardrails, along the way. Stocks often drift toward their support or resistance lines and then bounce back in the opposite direction.

3. If you can pick off a stock you find attractive as it is bounces off the support line, it could be a terrific time to buy. The reason is you have a strong, logical place for your stop point. . . just under the support line, which is really close by. This helps minimize the amount you have at risk.

4. Some of the best winners come from stocks that are purchased just as the stock breaks through overhead resistance and forms new patterns. Holding the stock until it breaks support line (which might be possibly many months, or even years later) can really help your overall performance!

5. The reasons behind why a stock jumps through a brick wall are often not clearly visible. The reasons for the move may emerge days or weeks (or even a year!) down the road. But when a stock or a mutual fund breaks through the trend line, either up or down, it’s important news.

6. If a stock or mutual fund we are following breaks through it’s overhead resistance, we have a high level of confidence that the stock will continue to climb upward.

7. Lastly, if the support line of your mutual fund or your stock is broken, beware! This is a very clear signal we should consider selling a portion (or maybe even the entire) position. Breaking the support line is the ultimate sign that supply is now clearly in command. Your principal is now at risk.

Thomas P. Mullooly, President of Mullooly Asset Management, LLC ( ) has spent over twenty years in the investment industry, as a broker and as an investment advisor. Feel free to contact us to check out the relative strength of your portfolio by sending an email to or visiting or sign up to receive the market report and tips on how you can soundly invest your money at .


Article Source:

Rate this Article: 
Forex Trend Following The Art of Trend Following For Mega Profits
Rated 4 / 5
based on 5 votes

Related Articles:

Make Trend your Friend in Forex

by: Amy Peter (February 11, 2011) 
(Investing/Day Trading)

Trading Stocks - The Trend is Your Friend

by: Waldemar Puszkarz (October 16, 2008) 

Make Trend your Friend in Forex

by: Amy Peter (March 29, 2011) 
(Finance/Currency Trading)

6 Reasons Why Web Templates Are Today's Trend

by: John Teh (June 22, 2005) 
(Internet and Businesses Online/Web Design)

Reassuring Reasons Why Hypnosis is your Friend

by: Mark Tyrrell (December 15, 2005) 
(Self Improvement)

Top 10 Reasons WHY RSS Autoresponders Are Becoming A Permission Email Marketers .

by: Cory Threlfall (October 01, 2005) 
(Internet and Businesses Online/RSS)

New Trend in Real Estate - Fly By Night Title Companies a Growing Trend

by: Scott Daniels (August 08, 2007) 
(Real Estate)

Profitable Trend Forex System Review - Following The Trend To Profits!

by: Thomas Eliot (March 17, 2008) 
(Finance/Currency Trading)

Day Trading Signal - Is It Better To Use Trend Or To Counter-Trend?

by: Franck Silvestre (February 15, 2008) 
(Investing/Day Trading)

Forex Trend Following The Art of Trend Following For Mega Profits

by: Kelly Price (July 22, 2008) 
(Finance/Currency Trading)