Trendlines stock market winners?

Finding Winners a book by Richard L Evans offers us way of using trendlines to identify profitable investments among depressed and low priced stocks. This requires understanding trendlines which at first I believed was to complicated to understand. With this attitude, it was. When I decided what Richard was offering was beneficial, I approached it with a new attitude. I decided to take a stock I bought to see if what he was discussing works. The Stock is APNX. I bought it some time ago at $.12 a share. Since then the stock has dropped as low as $.08 a share. A loss of 1/3 of my original investment. Quite unnerving.

Richard discusses the study of trends from the eye of the beholder. To understand trends, one has to understand that most all stocks have trends of some sort. Sometimes they trend higher, other times lower. They may even be flat. It is this movement that causes patterns the investor studies to determine if you have found a winner.

The patterns can be U shaped, up, down, up, zig zag, up down up down up down, or wave up flat down flat up flat down flat up. Trends will have a duration that is short, intermediate or long. In all instances, these trends reflect the stocks demand and supply. When the supply is low, demand high, the price increases. When supply is high, demand low, the price decreases. Daily Highs and lows set the pattern. Evey day the high is compared to the high of the previous day. The low is also compared. When the stock's price drops below the high or low from the previous day or previous low or high, a new high or low is recorded. The trend is determined when it breaks through the previous low. If over time the stocks low price moves lower without breaking the previous high, the stock is declining. If it is the reverse, moving up without breaking the low, the trend is up, higher. This movement up or down when well defined makes it easier to see when the stock no longer goes lower if in a downtrend or higher if in a up trend. When the stock low for the day is higher than the stocks lowest point, it is considered a break through.

The rule of thumb is the longer the downtrend or more defined it is, the more important is the change in trend.

Lets look at APNX for our example. Sept shows the stock reaching a high of $.24 a share. From that time on, the stock shows a good example of a downtrend. Some slides occur with a couple of rallies, not once going above the high of $.24 set in Sept. The real drop occurs early January 2010. It reaches a low of $.08 a share. You will now see the downtrend become more defined with rallies closer together. This shows both a long downtrend and a period of a well defined pattern. I bought at $.12 a share in January believing the news was the driving force for an increase. It wasn't. It did end up higher today with low volume. If it trades higher tomorrow or the next time it is traded,as this stock doesn't trade often, then the downtrend is broken. It is at this time it may be a good time to speculate. Stocks that are depressed or low priced generally move higher or lower when the appropriate trend line is broken. I will be watching closely to see if I truly understand trend lines. Please let me know what you think? Thanks for reading.

PS. APNX has also picked up interest from new interest by a stock guru and news the OPS is positive based on earnings.