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More on Trending Bars
by kathia

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ClearStation's software considers a number of different variables before determining that a stock deserves a trending bar on its price graph. Among the most important of these variables are EMAs and MACD. Of course, we also consider other factors: volume, general volatility, and history to name a few.

In other words, whether the bars appear isn't determined by just one indicator; a combination of events causes them to go up or down.

Crossovers are turning points for trends. Whenever a crossover happens, whether it's the EMAs or MACD, it's likely that a trending bar will be triggered. Here are some guidelines to keep in mind:

  • When the 13-day EMA crosses over the 50-day EMA, that's a clear sign of an uptrend. The 50-day EMA crossing over the 13-day signals a downtrend.

  • For MACD, determining whether the crossover is going to cause a trend is trickier. It really depends on where the crossover happens (as well as on what's going on with the other indicators). If the red fast line crosses over the blue slow signal at or above the centerline, you have a trend. But if the crossover happens below the centerline, you don't. A trend doesn't occur until the lines sail up past the centerline -- and then only if the other indicators are healthy.

    Downtrends are just the flip side. The blue slow signal must cross over the red line below the centerline for it to really count.

    (Note: You'll learn more about MACD in upcoming articles. If you don't understand how it works now, you should by the time you read through Education.)

Any of the same factors can cause a trending bar to "go down". When a trending bar goes down, that trend is said to have "stopped out" or "paused".

Sometimes the end of the trending bar signals a definitive break in the trend. However, it could be pausing (or catching its breath) before starting another leg of a longer, ongoing trend.


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