Last Updated: Oct 12, 2022 Value Broking 4 Mins 2.6K

The stock market in India provides a significant opportunity to grow money. You can invest or trade in the Indian stock market and gain a considerable return. However, investors or traders who want to profit must move into the market smartly. First, you need to understand how to identify trends in share market. This article will discuss how to analyse stock market trends. 

Why Share Market Trend Analysis is crucial For Investors?

A share market trend means a general direction by which you can know where a stock is moving. You can understand whether it is a bullish trend or a bearish trend. 

A bullish trend means a trend going upward, while a bearish trend of share market means a downward trend. Therefore, it is crucial to notice when the trend moves longer, either downward or upward. 

Trend trading defines a marketing strategy with different marketing indicators. You can identify the asset direction using indicators. By analyzing the asset direction, you can make profitable trades. For example, if there is an upward movement for security, it is good to go for a long position. 

Here are the essential elements to forecast and analyze the trading- 

  • Past performance
  • Price movements
  • Historical trends, etc.

You can use trendlines, price action, and technical indicators to determine a trend in the share market. You can understand a trend direction using trendlines, while you can understand a trend strength at any time using the Relative Strength Index (RSI). An uptrend means a price rise overall. There is nothing like going straight up for an extended period due to oscillations. However, the overall direction must be higher for an uptrend. Recent swing lows should be above prior swing lows, which applies to swing highs. After breaking down this structure, an uptrend can be reversible into a downtrend. Downtrends comprise lower swing lows and lower swing highs.

During an uptrend, traders may believe this trend to continue. Still, they don’t get any evidence for contradictions. Such evidence may be the following- 

  • Lower swing lows or highs
  • The price breaking below a trendline
  • Technical indicators turning bearish

During a downward trend, traders mostly look for selling or shorting to reduce losses and gain from the price decline. There is a significant chance of downtrends getting reversed at some point. The price falls continuously; more traders start looking at the price as a bargain for a buy signal. As a result, it tends to have an uptrend emergence. 

Those investors who focus on fundamental analysis must use trends. This analysis considers changes in different factors such as revenue, earnings, other business, or economic metrics. Fundamental analysts consider trends in the following-

  • Earnings per share (EPS)
  • Revenue growth trends

Earnings growing for the past four quarters indicate a positive trend, while 
earnings declining for the past four quarters show a negative trend. A slight upward or downward progress period is a range or trendless period.

Understanding If it is a Valid Trend?

The trend is formed now and then in the stock market. Therefore, it is essential to understand a trend to take advantage of it. 

Below are the five rules for the most accurate stock market trend analysis.

Three data points needed – A trend with three or more contact points is valid.

Direction – There are three directions up, down, and sideways in trends. Studying prices over time will help you see these trends on the same chart.

Watch the slope – With this trend, you understand how much the price movement should be every day. Whether going upward or downward, steep lines will make you determine a particular trend.

Time the trend – The amount of time will make you understand a trend’s validity.  Monthly time series have greater importance than weekly prices, superseding prices daily.

Long-lasting – A longer trend means carrying a greater weight. Stock market analysis allows you to analyze and get positive results when you have complete knowledge.


The Indian stock market is a pool of investment and trading opportunities; you need to understand trends and identify them. Share market trend analysis is helpful to understand trends in the market.

Frequently Asked Questions (FAQs)

Here are the following three types of market trends.

Uptrend Vs. Downtrend

With this trend, you can understand the price momentum during all the noise. This underlying trend gets formed with a series of highs and lows. Connecting a series of chart high points sloping down means experiencing a downtrend. Connecting low points sloping up means experiencing an uptrend.

Volatile Vs. Lackluster Trend

These are flat trends. They are known as directionless markets. So you can clearly understand whether you should opt for volatility or against it. Plus, deciding between a long strangle and a short strangle will be easy for you.

Short-term Vs. Long term Trend

These are known as underlying trends when it comes to time frames. For example, you can find a series of short-term downtrends within a long-term trend that continues for 3-5 years. You can also analyze the longer-term trend for delivery position ratification.

Here are the following reasons for identifying trends in the market.

  • You can have decisive identification over the overarching trends at any time to carry out your trades accordingly.
  • Moreover, you can understand whether and how the trend reversals help gain in the short term.
  • After knowing the market’s underlying trend, you can clearly and precisely identify the support and resistance levels.

Here are the ways to use a trend line.

Checking the trendline’s breakout will be helpful to indicate a trend reversal.

In addition, a broken uptrend line and the stock getting closed below the uptrend line help you understand whether the previous uptrend no longer exists. A broken downtrend line and the stock getting closed below the downtrend line will be helpful to understand a buy signal.

Here are the following things to ratify with all these trend breakouts.

  • Volumes
  • News flows
  • Chart patterns

Mentioned below are the critical trading applications of a trend line:

  • Waiting for the price to get a higher low and reach the lower trendline is a good idea for a buy signal in an uptrend.
  • You can buy when the price touches support while selling when touching resistance.
  • A trendline is useful in extrapolating the future price trajectory.
  • A trendline is like an advanced warning system when reversibility in a trend.