DaytradeTeam Profitzzz

A downtrend in stock trading occurs when a stock has a series of lower highs and lower lows throughout a certain period of time---just the opposite of an uptrend. Here is what a downtrend on a stock chart looks like (example uses YHOO):

Notice how you can draw a straight line connecting the high points on the chart---this is called the trend line. Typically, stocks in an downtrend will continue to move lower until that trend line is broken. Bounces that move up toward the trendline are typically good short selling opportunities on stocks.

Downtrends can occur over any time frame. For example, if you are day trading, you may look for a 2-5 day downtrend, where if you are looking at longer term opportunities you would look for an downtrend in the 3-9 month range. The longer the trend has held, the more likely it is to continue into the future.

Stocks may also form trend channels, which can more accurately display good entry and exit points for stock buying.

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