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Understanding Market Trends: A Focus on ASX Stocks
In the world of stock trading, the principles of trend analysis guide investors towards making informed decisions. A well-accepted mantra in this domain states: “The trend is your friend until it bends, then ends.” As technical analysts, our role revolves around identifying which of the three phases—uptrend, downtrend, or sideways—any specific stock or market is currently navigating.
When assessing ASX defence stocks like Droneshield (ASX: DRO), Elsight (ASX: ELS), and Electro Optic Systems (ASX: EOS), determining their stage in the trend hierarchy is crucial. Recent analyses indicate that all three stocks appeared on my Uptrends Scan List, signalling a strong current uptrend (designated as “1”)—a stage we aim to invest in before any bending occurs.
Emphasis should be placed on timely buying during this phase rather than hesitating out of fear. Should these stocks transition into stage “2” (indicating potential risk), it’s prudent to reconsider exposure and possibly take some profits. By the time they reach stage “3,” smart investors should ideally exit with minimal or no risk left on the table.
A prime example of a consistent uptrend is the Commonwealth Bank (ASX: CBA), marking its 62nd appearance in my trend analysis, signalling robust performance despite potential investor fatigue regarding its frequent presence on the lists.
Identifying Strong Trends
Each stock can belong to a strong trend category irrespective of its market capitalisation, dividend yield, or price-to-earnings (PE) ratio. For instance, CSL Limited (ASX: CSL) and Treasury Wine Estates (ASX: TWE), despite currently experiencing downtrends, exhibit strong directional movements—27 and 17 consecutive downtrends, respectively. Here, trend-followers remain focused on their positions, whether long or short, without bias on the direction.
This overview ties into the ChartWatch Daily ASX Scans series, through which I present curated lists based on systematic trend following metrics, aiming to highlight significant uptrends and downtrends.
Today’s Uptrends and Downtrends
Investors often align their strategies with stocks showing strong positive trends while avoiding, selling, or shorting those in decline. While many stocks frequently rotate on these lists as per my analytical criteria, it’s incumbent on investors to stay vigilant for changes that could signify trend shifts.
Uptrends Scan List
| Company | Code | Last Price | 1mo % | 1yr % |
|---|---|---|---|---|
| African Gold | A1G | $0.185 | +54.2% | +537.9% |
| Droneshield | DRO | $2.14 | +82.9% | +25.9% |
| Commonwealth Bank | CBA | $191.40 | +10.1% | +49.9% |
| Elsight | ELS | $1.505 | +131.5% | +306.8% |
| Tasmea | TEA | $3.74 | +31.9% | +157.7% |
| … | … | … | … | … |
Today’s Uptrends List highlights stocks displaying excessive demand, such as AMA Group (ASX: AMA), Global X Semiconductor ETF (ASX: SEMI), and others showing compelling recovery patterns.
Downtrends Scan List
| Company | Code | Last Price | 1mo % | 1yr % |
|---|---|---|---|---|
| Botanix Pharmaceuticals | BOT | $0.290 | -20.5% | -13.4% |
| Coronado Global Resources | CRN | $0.120 | +4.3% | -90.0% |
| CSL | CSL | $238.45 | -3.5% | -18.6% |
| Treasury Wine Estates | TWE | $7.84 | -5.0% | -37.9% |
| … | … | … | … | … |
The stocks within the Downtrends Scan exhibit considerable supply pressures, reinforcing caution. Investors should take note of historical performance trends—a stock may quickly shift from a strong downtrend to a potentially profitable position if the underlying market dynamics change.
Conclusion
Navigating the complexities of the stock market requires a solid grip on trend analysis. In analyses like my ChartWatch Daily ASX Scans, I provide insights that enable investors to refine their strategies based on real-time market conditions. Remember, whether investing in uptrends or shorting downtrends, the essential focus should remain on understanding and reacting to the prevailing trend dynamics. Always actively conduct thorough research and monitor your chosen stocks as trends evolve.
