Benzinga
Published May 16, 2022 18:31
Updated May 16, 2022 19:10
After A Big Price Swing, Which Pattern Will Dominate On Shopify's Chart?
Shopify, Inc (NYSE: SHOP) was plunging over 10% at one point on Monday, as the stock continued a consistent downtrend which began on April 5, when Shopify broke bearishly from a triangle pattern.
A downtrend occurs when a stock consistently makes a series of lower lows and lower highs on the chart.
The lower lows indicate the bears are in control, while the intermittent lower highs indicate consolidation periods.
Traders can use moving averages to help identify a downtrend, with descending lower timeframe moving averages (such as the eight-day or 21-day exponential moving averages) indicating the stock is in a steep shorter-term downtrend and descending longer-term moving averages (such as the 200-day simple moving average) indicating a long-term downtrend.
A stock often signals when the lower low is in by printing a reversal candlestick such as a doji, bullish engulfing or hammer candlestick. Likewise, the lower high could be signaled when a doji, gravestone or dragonfly candlestick is printed. Moreover, the lower lows and lower highs often take place at resistance and support levels.
In a downtrend the "trend is your friend" until it’s not and in a downtrend, there are ways for both bullish and bearish traders to participate in the stock:
See Also: How to Read Candlestick Charts for Beginners
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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