An uptrend consists of increasing prices with observably higher price peaks and troughs. A peak is the highest price point reached before prices retrace (move against the uptrend). A trough is the lowest price point reached when prices are retracing; the lowest price level reached before the uptrend continues.
For prices to consistently uptrend, bullish sentiment must overpower bearish sentiment. Therefore, demand is greater than supply. An uptrend can be short-term, intermediate-term, or long-term.
Figure I.1 shows a short-term uptrend on a candlestick chart. We can observe progressively higher troughs and progressively higher peaks through a sequence of 20 sessions spanning a little less than a month.
Figure I.2 shows the short-term uptrend we analyzed in Figure 1.1 incorporated within an intermediate-term uptrend. We can also identify a short-term sideways trend within the intermediate-term uptrend. The intermediate-term uptrend consists of approximately 100 sessions (100 trading days) spanning over approximately 4-5 months. Therefore, we can consider an intermediate-term uptrend in operation. The short-term sideways trend within the intermediate-term uptrend consists of approximately 20 sessions. Therefore, we can characterize the sideways price movement as a short-term sideways trend.
Now, let’s see how the intermediate-term uptrend and short-term sideways fit within the long-term trend.
Figure 1.3 shows a long-term uptrend, a marked intermediate-term sideways trend, and a marked short-term sideways trend. Do not let the title of Figure I.3 confuse you; there are several short-term trends and a few intermediate-term trends present within the long-term trend. Be sure to identify them. Not all short-term and intermediate-term trends are marked to reduce clutter.
Bottom line: we don’t have an uptrend without progressively higher peaks and troughs.
Here’s what price movement looks like with progressively higher peaks, but troughs bottom out at the same price,
Figure 1.4 Higher peaks with Similar Price Troughs
Prices reached higher peaks throughout the sequence; however, the same support level was tested subsequently. If an uptrend is to occur: buying pressure must exceed selling pressure at higher and higher price areas continuously. Ideally, prices won’t bearishly retrace more than 66% before the uptrend continues.
Figure 1.5 Higher Troughs with Similar Price Peaks
Figure 1.5 shows progressively higher troughs; however, prices peak at the same level. We can’t have an uptrend is demand fails to exceed supply at the same price level continuously.
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