- 1). Select a time period to conduct an analysis. Due to the nature of markets, trends exist during every time interval. In general, the longer the time period the more volatile the trend. The trend you want depends on the type of investor you are. Day traders are looking for trends by seconds. However, investors trading for a retirement plan may be looking for longer-term trends.
- 2). Obtain historical prices for the company in which you are interested and plot the prices over a certain time period.
- 3). Obtain the annual reports for the past five years of the companies whose stocks you are following. The annual report contains three of the company's financial statements. You can obtain the annual report by going to the company's website or contacting the company's investor relations department.
- 4). Plot sales and net income over the past five years on graph paper or a spreadsheet. Look for repeating patterns that make operational sense. For instance, if you see that every quarter or year, for the past five years, net income has gone up while revenues remained flat, the trend is that costs are decreasing.
- 5). Look for patterns in historical price charts, which should track the stock over a certain time period. There are many different kinds of patterns technical analysts look for in a price chart. Traders look for areas of resistance (price highs) and support (price lows) to provide clues about the future direction of stocks.
- 6). Connect patterns to a larger industry or economic trend for confirmation. Look for trends connected to timing of day, week or year, especially with regard to industry or economic announcements.
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