Volatile markets, quick trending
If there is one great thing about today’s volatility it is the quicker developing trendlines that come with it. Highly volatile stocks are pushing trends quicker, rather than having a week to a month in between top and bottom support and resistance lines, its taking just a few days. Large movements up and down fill out trends quicker and with more accuracy, slower trending is more likely to push out of an existing trend while quick movements mean a contained trend.
Looking at a specific company, Intel, over the last two years shows the amount of quick trending that is taking place. With daily bars and a 2 year timeframe, I was able to draw 8 very simple trendlines that made up the majority of the chart. The up and down between top and bottom shows how a quick responding market keeps price in check while following a long established trend. Without thinking, traders quickly exit and re-enter the market near the tip of the trendlines and keep stock prices in a long term channel.
We may actually be in a position where excess volatility is keeping the market more balanced than if it were left to low volume and slow moving charts. I think as an investor I may have stumbled on something here, the volatile conditions appear to be propping up markets rather than dropping them, even in a time littered with bad news. As volatility rises, I think we’re going to see that trendlines bring additional support because investors act with the trend then with investor data. This is good for the overall market which might be swamped with sell orders if not for the kind of irrational buying and selling we see today.