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Tricks with Trendlines

Trendlines are lines that can be drawn to connect the lows of market reaction moves during market advances or to connect the highs of market reaction moves during market declines. As Chart 4.5 shows, such trendlines often define the direction and slope of longer-term and shorter-term movement trends.

Chart 4.5. Resistance and Support Provided by Trendlines

This chart shows the intermediate trendline that defined the initial months of the 2003 bull market. The chart also provides examples of the tendency of trendlines to act as resistance when they are penetrated to the downside and to act as support when they are penetrated to the upside.



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