Market Sentiment Expressed in the Trend
The current sentiment of the market (bullish or bearish) is evident in the characteristics of every trend. This applies to markets overall and movement of indexes; it also apples to individual stocks.
When investors are confident and optimistic about a company, its stock trend is going to move upward. This is true even when price movement is not supported by the fundamentals. For this reason, tracking of price-based range indicators is one form of trend analysis. Is the price justified by current and potential earnings?
Tracking the price/earnings ratio (P/E) provides the answer. When the range is between 10 and 25, it is a reasonable mid-range level. If P/E moves above this level, the stock begins to ...
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