Trend Lines
Trend lines are drawn on a stock chart when the price has been either going up or going down for a period of time. Trend
lines can show the selling range in which the stock currently rests, which could give an indication to the trader as to
how high or how low the stock may travel. Trend lines are an important aspect of technical analysis.
To draw a trend line, you must first identify the length of the trend in question. For an intraday trader this may be a
period of hours. For short-term traders it could be a period of weeks. For long-term traders it may be a period of
quarters or years.
To identify an uptrend on a chart, draw a line from the lowest low point to the highest low point that occurs before the
highest high point on the chart. As long as prices remain above the trend line, the stock is considered to be in a
bullish trend.
To identify a downtrend on a chart, draw a line starting from the highest high to the lowest high that occurs before the
lowest low. As long as the prices remain below the trend line, the stock is considered to be in a bearish trend.
Most traders will use a line chart when drawing a trend line, then switch over to a candlestick chart to view the various
price gyrations.
The trend lines that you draw can be used as levels of support and resistance, but will end when the current trend ends.
They are likely to show patterns that may not have been obvious by a cursory examination.
Stock Chart Basics
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