TRENDLINES ARE ONE OF THE MOST SIMPLE, YETEFFECTIVE, OF ANY OF THE TOOLS USED IN TECHNICAL ANALYSIS
SINCE MARKETS CAN MOVE SIDEWAYS, TRENDLINES CAN BE HORIZONTAL
IN ORDER TO DRAW A PROPER TRENDLINE, IT IS NECESSARY TO HAVE2 REVERSAL POINTS TO CONNECT, OTHERWISE IT IS A LINE DRAWN INSPACE WITHOUT ANY TECHNICAL SIGNIFICANCE
A TRENDLINE REPRESENTS A DYNAMIC MOVING AREA OF SUPPORT AND RESISTANCE
A GOOD TRENDLINE REFLECTS THE UNDERLYING TREND IT TRIES TO MONITOR
THIS IS NOT A TRUE TRENDLINE
THE MORE REVERSAL POINTS ARE ON YOUR LINE, THE STRONGER THE TRENDLINE
THE MORE REVERSAL POINTS ARE ON YOUR TRENDLINE, THE MORE IMPORTANT WILL BE ITS VIOLATION.
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UNFORTUNATELY, THERE IS NO WAY TO KNOW WHICHOUTCOME WILL OCCUR AT THE TIME OF THE VIOLATION
VILOATION OF THE GREEN SUPPORT LINE ON THE RECTANGLE, AND VIOLATION OF THE RED TRENDLINE
EXTENDED TRENDLINES
AN OFTEN FORGOTTEN POINT CONCERNING TRENDLINES IS THE FACT THATONCE THEY HAVE BEEN PENETRATED, THEY REVERSE THEIR ROLE AS SUPPORT AND RESISTANCE LEVELS.
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SIGNIFICANCE OF TRENDLINES
TRENDLINES OBTAIN THEIR SIGNIFICANSE FROM 3 FACTORS :
1. THEIR LENGTH
2. THE NUMBER OF TIMES THEY HAVE BEEN TOUCHED OR APPROACHED
3. THEIR ANGLE OF ASCEND OR DESCENT
VIOLATION OF ST-TRENDLINE HAS LITTLE IMPACT ON THE OVERALL TREND.
VIOLATION OF LT-TRENDLINE HAS SEVERE REVERSAL IMPACT ON THE OVERALL TREND.
THE MORE TIMES A TRENDLINE HAS BEEN TOUCHEDOR CLOSELY APPROACHED, THE MORE RELIABLE IS THE SIGNAL
THE STEEPNESS OF THE TRENDLINE IS THE THIRD MAINFACTOR OF SIGNIFICANCE
VERY OFTEN, PENETRATION OF STEEP TRENDLINES ARE FOLLOWED BY CONSOLIDATION PHASES
LESS STEEP TRENDLINE, THEREFORE MORE LIKELYHOOD OFTREND REVERSAL . ANY FAMILIAR FORMATION ?
TREND CHANNELS
OCCASIONALY, IT’S POSSIBLE TO CONSTRUCT ATRENDLINE THAT RUNS ROUGHLY PARALLEL TO THE BASIC TRENDLINE
RESISTANCE
SUPPORT
EXAMPLE OF AN UPTREND…
RESISTANCE NOW BECOMES A SUPPORT LINE
IT’S SOMETIMES POSSIBLE TO CONSTRUCT ANOTHER CHANNEL
THE MOVE OUTSIDE OF THE CHANNEL DOES NOT HAVETHE SUFFICIENT POWER TO GO HIGHER…NOT A GOODSIGN !!!
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CORRECTIVE FAN PRINCIPLE
THE FIRST RALLY IN A BULL MARKET IS USUALY EXPLOSIVE, SO THE RATE OF ASCENT OF THE PRICE IS USUALY UNSUSTAINBLY STEEP
TRY TO DRAW A FIRST TREND LINE…(PRIMARY TREND)
…THEN DRAW A SECOND TRENDLINE…(INTERMEDIATE TREND)
…AND FINALLY A THIRD AND LAST TRENDLINE !!(LT-TREND)
THOSE 3 LINES REPRESENT THE PHASES OF A BULL MARKET