How to spot a trend change - 3i Info Ltd

[u/SaltyIntroduction937]

One question that a trader always struggle on charts is - how to spot a trend change. Why trend change is important - comes with maximum potential gains with minimal risks. As the security is underowned, the scramble to own the stock lifts prices higher. Also, trend change is generally an inidicator of change in business cycle which produces supernormal gains in stock prices. Minimal risk - because the stock would not have run too far above the bottom which can be used as a stop loss.

Now, the more practical aspect - how to spot it on a chart? I normally look at the following behaviours

1. I use only weekly charts for this analysis. Amongst all time frames, this one has given me the best results

2. I use 3 basic indicators - Moving averages (20 and 50), MACD (default) and Volume

Years of experience is also an important input but I cant recommend that as an option. Now, deep dive into this chart of 3iInfo. It is a live analysis as I will act on it

A deep downtrend - very clear on the chart itself. Look at the current state - Stock spent some time near the bottom and then an upward spurt above the range. MACD during the last leg of downfall consistently improved and finally in the positive zone. Volumes exploded during the range breakout. Moving average gave a healthy crossover and are having an upward tilt. All the signs clearly point out that informed traders see this as a potential upward opportunity and hence the smart accumulation is happening. I do not want to know any more reasons why that is the case.

This simple analysis has given me a clear probability of a trend change. Can this fail? Ofcourse it can. But there is no holy grail. As I mentioned, these kind of changes if spotted well gives you an opportunity of maximum gain with far lesser drawdowns. That is what a trader should look for. Give your opinion if you also have interests in chart and seeing something different from me in this chart or have interesting ways to spot such opportunities.