In a market trend, prices go up in one direction over time (upwards, bull run), down in another (downward, bear run) or sideways (rangebound). People who trade look for trends that are likely to last and can find them by using different technical tools and analyzing price patterns. They also watch for any news that could change the trend’s momentum and make it weaker or even reverse.
In many markets, uptrends are created by the relationship between supply and demand. For instance, wars and mining disruptions can restrict oil production, causing prices to rise. Other things that can make prices increase include good news about the economy, company profits and positive economic findings that beat expectations.
Traders can recognize an upward market trend by looking for patterns of higher peaks and deeper valleys over a long period of time, as well as checking whether more trading is taking place as the prices climb. They can also check whether the trend line – a straight line that connects 2 or more price points and extends into the future – goes up with each rising peak.
In addition, if the RSI indicator or Moving Average Convergence Divergence line (called MACD for short) stays higher than its signal line, it’s more likely that the uptrend will keep going up. Traders can also use candlestick patterns like shooting stars, big bearish engulfing shapes and evening stars to identify important resistance levels where the upward trend may slow or even reverse.