Chapter 25 · Trend Analysis
Multiple timeframes, and measuring trend strength
Why the weekly and daily charts disagree by design, and how to use both without arguing with yourself.
Higher highs, higher lows, and the break
Most confusion about trends is really a timeframe problem. The weekly chart and the hourly chart are not contradicting each other — they are answering different questions, and a position belongs to exactly one of them.
One job each
| Timeframe | Question it answers | Decision it drives |
|---|---|---|
| Weekly | Which way is the primary trend? | Whether to be long at all |
| Daily | Where is the current leg, and is it tiring? | When to enter, and where the stop goes |
| Intraday | What is the best fill available now? | Execution only — and NEPSE's session is short |
The rule that makes this workable: the higher timeframe grants permission, the lower one sets the price. A daily buy signal against a falling weekly trend is a counter-trend trade, and should be sized as one.
Worked: the same stock on two timeframes
| Weekly | Daily | |
|---|---|---|
| Structure | Higher highs and higher lows since Magh | Lower highs for three weeks |
| Last swing low | Rs 402, intact | Rs 468, broken |
| Reading | Primary uptrend | Secondary reaction inside it |
- Nothing here is contradictory. A secondary reaction is *part of* a primary uptrend — Dow said so.
- For an investor on the weekly, this is a pullback and possibly an opportunity.
- For a trader on the daily, the trend is down and long positions are against it.
- Both are right. What is wrong is entering on the daily and then defending the position with the weekly when it goes against you.
Measuring how strong a trend is
| Measure | Calculation | Reading |
|---|---|---|
| ADX | Wilder average of DX | Below 20 no trend; above 25 a trend; above 40 strong |
| Price vs 200-day average | Close ÷ SMA(200) | Persistently above 1.0 is a primary uptrend |
| Slope of the 50-day | Change in SMA(50) over 20 days | Direction without daily noise |
| Depth of pullbacks | Retracement ÷ previous leg | Shallower pullbacks, stronger trend |
| Length of legs | Rupees gained per leg | Shortening legs mean a tiring trend |
Worked: a trend losing force before it breaks
Three advances of Rs 62, Rs 48 and Rs 30, taking 14, 17 and 21 days.
- Rate per day: 4.43, then 2.82, then 1.43 rupees.
- Each leg gains less and takes longer. The structure of higher highs is intact, so the trend is not broken.
- It is tiring. That is a reason to tighten a stop or stop adding — not a reason to sell short.
- The break comes later, when a pullback ends below the previous swing low.
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