Market trend analysis is a key aspect of business success. It helps identify consumer trends that impact product development, marketing messaging and long-term business strategy. It can also help a company gain competitive advantage by catching the latest change in market conditions and adjusting its business model to take full advantage of the opportunity.
There are different types of market trends, based on their length and the factors that shape them. Ultimately, all market trends involve shifts in supply versus demand for a given asset, with prices moving up or down depending on the balance of those forces. For example, if there is a surge in demand for oil, then the price of that commodity will rise. War or mining disruptions that restrict supply could also boost prices, and negative economic news can drive them down.
Secular trends are a bit longer-lasting, lasting from years to decades and shaped by structural changes in the economy and demographics. These types of market trends can influence entire industries and even entire countries. They are often impacted by government policy, which can slow or accelerate the growth of an economy and can have a significant impact on both cyclical and defensive stocks. Market trend analysis can be performed using a number of tools and techniques, including technical and fundamental analysis. For instance, a simple trend line can be created by connecting a series of price points – highs and lows – to create channels for future prices. Similarly, an EMA (equidistant moving average) or SMA (simple moving average) can be used to calculate average prices over a particular time period and provide support and resistance levels for future price movements.