Market

Trends
Course

Q4 2024

STOCK MARKET EDUCATION SERIES

1.What are market trends
2.Trends in different types of markets
3.How to analyze stock market trends
4.Events and factors that may affect
market trends
Understanding the direction and trend of the stock market is important for
all traders and investors. Let's start by understanding the exact meaning of
market trends.

What are market trends?

Investing in stocks can be a wild ride that triggers our emotions

and controls our decisions. When stocks go up or down quickly,
we may become impulsive and react accordingly. However,
such investments can be risky. Instead of making decisions
based on emotions, the best thing you can do is to spend time
analyzing market trends.
Market trends allow you to see the usual ups and downs and see
how stocks are performing over time. This helps you understand
typical trends, consumer habits and behaviors over a set period
of time. Properly analyzing the data may reveal the overall
historical trend of the stock. Perhaps the stock always falls after
an earnings report and then rallies. If you can see how a stock
performs in a particular economic environment, you can get a
glimpse of how it will react under the same conditions in the
future and be prepared in case history repeats itself as usual.

Three types of market trends

Stocks don't always rise and fall consistently. Instead, stocks

usually rise to new highs and fall to new lows while prices follow
an overall trend. Investors tend to follow three types of market
trends in the market.
 An upward trend
An uptrend consists of peaks (tops) and lows (bottoms) in a stock
while the price continues to rise over an extended period of time.
Stocks may periodically hit new highs before falling below
previous levels. However, looking at the broader trend may
prevent many traders from selling during brief trough periods. If
share prices continue to rise despite short-term peaks and
troughs, this may indicate optimistic market sentiment.

A downward trend
A downtrend is when a stock continues to fall. Usually, there are
consecutive peaks and consecutive troughs that are lower, which
leads investors to believe that the stock will continue to fall. Even
if the gains are minimal, investors tend to sell the stock rather
than buy more shares because they don't expect the price to
recover.

A sideways trend
In a sideways trend, the stock does not move up or down.
However, peaks and troughs tend to remain stable over long
periods of time, making it difficult for investors to determine
whether to buy or sell.
 What affects market trends?
Many factors can affect market trends. The main influence is
economic activity, but whether we like it or not, geopolitics and
government actions can affect market stability or instability.
Supply and demand also influence market participation.
Although these factors are closely interrelated, they can also
cause and contribute to short- and long-term market volatility.
Investors and traders need to recognize trends to determine the
momentum of a market price or security, whether the trend is up
or down, so they can buy in the early stages of an uptrend and
sell before it falls too low to make a profit.

How to analyze market trends

The two main methods of analyzing stocks are fundamental
analysis and technical analysis. With these two methods, there
are several tools and calculations that can be used to analyze
the price of a stock and whether to buy or sell.
 Using Fundamental Analysis
Fundamental analysis refers to the analysis of financial
statements, rations and economic factors that affect the fair
market value of a company's stocks and securities.

Earnings
Earnings are probably the main indicator of a company's health,
and you want to invest in something that is healthy and growing.
If the same company doesn't realize its expected earnings, it
may drop its stock price.

Calculate earnings per share

Once you have determined the company's earnings, you may
need to do some math to figure out the earnings per share.
Divide the revenue by the number of available shares to get the
earnings per share.

Determination of net profit

Determining value does not require the company to earn
revenue alone, but rather how efficiently they do so. You can
determine their net profit by dividing their net income by the
number of sales. It is expected that some companies will have
higher revenue streams than others, so this is a good way to get
a better financial outlook.

Cash flow indicators

Cash flow is an excellent indicator of the efficiency of a
company's cash on hand: the more cash remaining, the greater
the ability to buy back stock or pay dividends.
 PE ratio
Once a company has reported its annual earnings, you can
determine its P/E ratio. You divide the earnings by the number of
shares so you can see the full market value per share.

Determining P/E growth

To get a better idea of a company's P/E ratio and its
performance, you can divide the yield by the growth rate over
time.

Return on Equity
You can measure a company's return on equity by dividing net
income by equity held by shareholders. This number will tell you
how good they are at using shareholders' money to generate
income.

Determining whether a stock is over- or under-valued

When trying to determine the value of a company, you can look
at what the company itself has written on its books. Looking at
the balance sheet is a good way to determine if a stock is
undervalued. A stock is considered overvalued when its current
price does not match its price-to-earnings ratio or earnings
projections.
 There are many reasons why a stock may be considered
undervalued as it is not limited to price. It could be a new
company in an emerging sector, or it could be a new
technology or service causing it to be undervalued because it
is a new concept.

The growth potential could shift in either direction. If you

think the company is producing a large-scale product or
service, then the share price may rise when others feel the
same way. If this happens, your return on investment may be
higher than average. Determining whether a stock is
undervalued may feel like intricacy, because if the company
isn't booming, the stock is reasonably valued after all.

Keep in mind that the market is cyclical and when the market
goes down, it is usually based on negative reactions that keep
stocks in a downward trend. Sometimes this can be the best
time to buy a stock at a lower price, which can produce profits
as the market rebounds. return on assets

Finally, you will want to know how a company utilizes its

assets to generate substantial profits. Return on assets (ROA)
is calculated by dividing a company's net income by the
average of its total assets. What is a good ROA? Typically, 5%
is a good rate; however, it can vary by industry.
 Overall Fundamental Analysis
The most effective way to use fundamental data is one of 2
ways.

1. Compare it with the previous quarters.

2. Compare it with other companies in the same industry.

When you compare the current data with previous quarter’s

data, you want to see a trend of growth. Even if the company
isn’t showing great numbers, a expanding trend is a great sign
that the company’s stock price will continue growing as well.
When you compare the data with other companies in the same
industry, you can look at ratios to get a baseline to compare. If
the company you are looking at has a trend of fundamental
growth, but their PE ratio, for example, is lower than another
with a higher stock price, you could be getting a bargain at the
current price.

Applied Technical Analysis

Technical analysis helps to consider statistics about market
activity based on historical changes in stocks. Historical trends
may help in predicting future changes in stock prices and
changes in trading volume.
 Technical indicators
Technical indicators are calculated by statistical algorithms
based on historical stock market data. When you can utilize
technical indicators, you can see if the market is following a
trend or in a consolidation by providing market signals, trend
reversals, and overbought or oversold.

The most common types of trend indicators include moving

averages ( MA ), Moving Average Convergence Divergence
(MACD), Exponential Moving Average (EMA),
Overbought/Oversold ( KDJ , RSI, BIAS), pressure/support
indicator (BOLL), etc. In addition, there are some special
indicators, such as Ichimoku, which can help you better
determine the trend of a stock.

Moving Averages for Stocks

A moving average is a statistic used to determine the market
trend of a particular stock price. A rapid increase or decrease in a
moving average usually indicates a good time to buy or sell. If the
stock price reverses the moving average, it may be considered a
breakout.

Volume
Volume is the number of shares traded in a given day, week or
month. Typically, if a price movement has no trading volume, it
is of minimal value.
 Importance of analysis
Analyzing stock market trends in conjunction with other
indicators is critical when making informed trading decisions.
Whether you use fundamental analysis, technical analysis or
both, you need to make informed choices and trade based on the
data. Taking the time to analyze can help you avoid emotional
trading, especially if you understand how the market has
behaved in the past and how it will perform in the future. For now
this concludes my lecture, and if you have any question make
sure to direct them to Jean who will direct them to me. As always
friends, good luck and good trading.