Use trendline on chartsIt is nothing more then line drawn by you into stock chart. But when you do it you will be able to see trends and also support or resistance levels very easy. Creating trend line in good stock technical analysis software is not complicated. You simply connect important lows (for uptrend) or important highs (for downtrend) and extend such line into future. Done ! And the best is that you have created line acting as support or resistance now and especially in the future ! Here it is again - in the future. You have already something which allows you predict what will stock do in the future ! But nothing is better then see it on chart examples. So here they are:
The yellow line you see on chart I draw personally. It is trend line for uptrend and it connects first two major lows. Second low must be higher then first low. Then third important low has been created just on the trendline. It worked as support line in this case. You can notice that uptrend line has positive slope - it is moving up. You can find there also short body candlesticks, doji candlestick or hammer candlestick near trendline. As I already described in
support and resistance page
, do not expect that price will stop pullback right on the support line. You have to think about it as about some price support zone. Example for downtrend:
The trend line for downtrend connects first two major highs. Second high must be lower then first high. Then third important high has been created just around drawn downtrend line. It worked as resistance line in this case. You can notice that downtrend line has negative slope - it is moving down. You can find there also same short body candlesticks as on uptrend line.
! My trend lines tips
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