Trend Analysis
Figure 5.12 illustrates three idealized examples of changing cycle amplitudes.
Contracting formations are bearish in an uptrend and bullish in a downtrend.
Expanding formations (where both upper and lower boundary trendlines are
pointing in an upwardly direction) are generally bullish in an uptrend. The con-
verse applies to downtrends. The trend with steady and consistent cycle am-
plitude is regarded as bullish in an uptrend and bearish in a downtrend, and is
generally regarded as the most reliable trend in terms of extent and duration.
- Cycle Period: Decreasing cycle periods are also an early indication of potential
weakness in a trend. A gradual reduction in the cycle period during an uptrend
is an early indication that there may potentially be underlying weakness in the
uptrend. In similar fashion, a gradual reduction in the cycle period during a
downtrend is a bullish indication. See Figure 5.13.
figure 5.12 Decreasing Cycle Amplitudes in an Uptrend.
figure 5.13 Decreasing Cycle Periods in an Uptrend.