Why is there a temporary drop when a stock is on an uptrend while there is temporary bounce when a stock is on a downtrend?






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  1. We have the view (also shared by many) that movements of a Company’s share prices in the stock market are driven by crowd psychology which , in turn, is driven by fear and greed of the crowds.
  2. More than the news of Company’s performance or other news/events, it is the interpretation placed by the crowds on such news that influences the stock prices of the company - including sudden rises and falls too.
  3. Technically speaking:-
    1. In uptrend, it is normal for price to retest a broken resistance as new support;
    2. In downtrend, it is normal for price to retest a broken support as new resistance;
  4. In Elliott Wave Theory terms:-
    1. Temporary moves against the main trend are wave 2 and 4 at some degree of trend and are an integral part of wave development and progress.
  5. Such smaller counter-trend movements are a normal part of breathing of the markets and an aspiring Trader must learn to get emotionally comfortable with these to achieve consistent success.




Best wishes.

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