Trends vs value

Trend following is basically a timing mechanism that tells you when to go long or short on a particular market, as well as when to exit any existing positions. Some people do not like to trade unless they have an understanding of the reasons behind a move in a particular market, relying on some form of fundamental analysis for this. The danger with this is failing to heed the warning signals when an existing trend finishes and shows signs of reversing.

Apple downtrend continuing

Apple has been a profitable stock for trend followers in 2012 going back to the beautiful uptrend right at the start of the year. The current position (chart below) shows that the downtrend which started at the beginning of October is alive and well, and anyone who took that signal would comfortably be sitting in a very profitable position now, for doing very little.

Nasdaq leading the way down

Currently since the change in trend last week was triggered the Nasdaq has lead the way, weighed down by tech heavyweights such as Google and Apple (charts of the Nasdaq and Apple below). This is the most developed downtrend so far, with the pattern of lower highs and lower lows clear to see, coinciding with the channel lines signalling a breakdown.