Dow Theory Introduction of the two the underlying trends in several stages Money Tips

Category: Money tips Release Date: 2006-10-06

1. Bull market - the basic upward trend, usually (but not necessary) is divided into three phases:

A position in the first stage (or accumulation), at this stage, far-sighted investors know that despite the current market slump, but the situation will be reversed, and thus on the courage of those who bought at this time and luck are not enough to throw the seller stocks, and gradually raise its bid to boost the sell-off, the financial statements is still bad - in fact at this stage is always at its most depressed state, the public is confused by the stock market conditions and completely out of touch with market activity stagnation , but also began to rebound slightly

The second stage is a steady rise in trading volume as the company's business economy growing, while the company's earnings began to receive attention. It was also during this stage, the skilful traders tend to get the maximum benefit.

Finally, as the public swarm in the emergence of a market peak, the advent of the third phase, all the information is very optimistic about the amazing rise in the price and continue to create a "new page", continue to a large number of listed shares. At this point, you have some friends may be eager to jump to assert that "Look I know Quotes going to go up, and take a look at what the right to buy?" - When it ignores the fact that rally is likely to continue for two years, has been long enough, and now to the question which stocks to sell time, at this stage of the final period, trading volume increased alarmingly, and the "short sales" also frequently occur; junk stocks were also involved in the transactions (that is, low the price and does not, according to investment value stocks), but a growing number of high-quality stocks at this time refused to recover from.

2. Bear market - the basic downward trend, usually (also non-bound) is also characterized by three stages:

The first stage is a warehouse or decentralized (the actual start well before the latter part of a bull market), in the latter part of this stage, far-sighted investors are trading profit has reached an unusual height, and thus thrown in the rally held by the stock. Despite the bounce gradually weakened, trading volume remains high, the public still active. However, due to the gradual disappearance of anticipated profits, and the prices began to show weakness.

Stage of the second phase of what we call panic. Fewer buyers and sellers together has become even more impatient, the price declines accelerated in vain, when the trading volume reached a maximum value, the price is almost a straight line down to the lowest point. Panic phase usually far from the prevailing market conditions. In this stage, there may be a long second-class callback or a finishing movement, and then start the third phase.

Those who adhere to the panic stage investors over time or because of lack of confidence in throwing his shares, or because of the current low price to buy over the previous few months. Business information began to deteriorate, with the third phase of progress, decline is not fast, but continuing to this is because some investors because of other needs, had to raise cash and throw more and more of their holdings. Garbage stocks may have lost the first two stages of a bull market in its previous rate of increase in the stock and then drop a little better a little bit slower, it is because its shareholders have been insisting at the last minute, the result is the final stage of the bear market Such stocks are often the main characters. When the bad news is confirmed, and is expected Quotes will continue to put it a bear market is over, and often in all the bad news "out" before it is over.

Above described three stages of the bear market to study the issue and other persons who are named different, but I think this is thirty years the main decline to exercise more accurate and more practical division. However, it should remind the reader that no two bear markets and bull markets are exactly the same system. There are also three typical phases may be missing one or another, some major gains in the very beginning is extremely rapid price appreciation. The formation of some short-term bear no obvious panic stage, while others will panic end of the period, such as in April 1939. At any stage, there is no do not have a certain time limit. For example, the bull market of the third stage is an exciting opportunity for speculation, the public is very active, at this stage is likely to continue for at least a year may also be a month, however, panic phase of the bear market is not usually within a few days to spend several weeks to end, but from 1929 to 1932 period of between depression, then there are at least five waves dotted with panic.

In any case, we should always bear in mind the typical characteristics of the underlying trends. If you know the bull market of the last phase of what will appear in general signs, not to the bullish for the market confused by the illusion.