Buck the Trend
What Is "Buck the Trend"?
"Buck the trend" is a saying that alludes to when a security's price moves the other way to the broad market.
Grasping Buck the Trend
The adage "buck the trend" frequently portrays something beyond security prices and can likewise incorporate business and market vacillations. On the off chance that a company is recording increased sales, while its rivals lose business, the company would resist the trend. In technical analysis, bucking the trend is frequently viewed as a strong reversal signal, as it shows that investor sentiment is starting to betray the predominant market course.
A security can buck the trend in one or the other bearing however, commonly, it portrays the security performing better than the broader market's negative performance. For instance, in Feb. 2018, memory chip maker Micron Technology Inc. (MU) "bucked the trend" and rose more than 2% subsequent to giving a more grounded than-anticipated chip outlook, while the broader market (Standard and Poor's 500 index) was down almost 4% over a similar period. Short-term traders frequently take positions in stocks or sectors that are bucking the trend of the overall market and giving indications of relative strength.
A stock bucking the trend is normally a bullish signal when that stock opposes a predominant downtrend in its own industry or against the broad market. This recommends that investors have an interest in the stock in spite of the cynicism encompassing its rivals and companions. Market reporters might utilize the term while talking about the broader stock market corresponding to official election cycles. For example, in the last year of two-term administrations dating back to 1928, the stock market has lost an average of 4%. In 2016, notwithstanding, the stock market bucked the trend and rose 9.5%.
Buck-the-Trend Trading Strategy
Traders can utilize different time periods to make a buck-the-trend trading strategy. A 200-day moving average can be applied to the daily, hourly, and 15-minute chart of a stock to determine a trend's heading.
At the point when the trader is searching for a buy entry point, the stock's price ought to exchange well over its 200-day moving average on both the daily and hourly charts to show up momentum. The buck-the-trend part of this trading strategy utilizes the 15-minute chart; traders can make an entry when the price bucks the trend on this shorter time span. This shows a transitory retracement in the long-term trend and gives a high likelihood trading opportunity.
Most investment experts propose trading toward the predominant long-term trend. Contrarian traders who endeavor to profit from bucking the trend, for example, by picking market tops and bottoms, ought to place a stop-loss order close to their entry point to close trades that don't work out.
Highlights
- Buck the trend is a strategy that is generally usually utilized by contrarian traders.
- Buck the trend is a saying that alludes to when a security's price moves the other way to the broad market.
- In technical analysis, bucking the trend is much of the time seen as a strong reversal signal, as it demonstrates that investor sentiment is starting to betray the overall market course.
