Analyzing the SPEED of the TREND
-
The SPEED of a trend in the stock market refers to the rate at which the price of an instrument moves in a specific direction.
A high speed in a trend indicates strong momentum, often driven by robust market sentiment, significant news, or macroeconomic factors and an active participations indicated by volumes.
When a trend's speed diminishes, it can signal weakening momentum, suggesting that the driving forces behind the trend are losing strength. This deceleration often precedes a trend reversal, as market participants start to doubt the sustainability of the movement, leading to increased profit-taking and the entry of contrarian traders.
In the book "How to Trade Financial Markets Logically" by Ruben Chaves, he explains the theory of Speed.
The above is a snapshot about the Speed from his book, but he has highlighted in-depth information about Speed and the strength of the trend.
While reviewing the chart of Maruti, I recalled this theory and thought to share it with our readers.
Here is the chart of Maruti.
Source: Zone Mobile AppThe speed of the trend has been followed by an even stronger trend after a retracement.
However, the stock's recent lackluster momentum in the past few months is concerning as it lacks the speed of the trend.
Is this sign of the reversal?
In light of the Wyckoff pattern, the structure appears to indicate a distribution phase.
Fingers crossed for the investors in Maruti.
-
Sir i fully agree with you, but one question comes to my mind is their a indicator / tool to measure this speed and to find out in which stocks speed is reducing . please write an article explaining how to measure speed and identify stocks in which it is happening
-
@Deepakk Chabria Let me think.
