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Use trendline on charts

I like to use simple tools that help me identify a trend.

A trendline is a simple but very powerful tool. And it really works !

It’s nothing more than a line you draw into a stock chart. But when you do it, you can see trends and also support or resistance levels very easily.

Creating a trendline in good technical analysis software is not complicated. You simply connect important lows (for the uptrend) or important highs (for the downtrend) and extend the line into future. Done !

And the best part is that you’ve created a line that acts as support or resistance now and especially in the future! I repeat, in the future. You already have something that allows you predict what stock will do in the future!

But nothing is better than to see it on the chart examples. So here they are:

I drew the yellow line you see on the chart. It’s the trend line for an uptrend and it connects the first two major lows. The second low must be higher than the first low. Then, the third important low has been created but just on the trendline. It works as a support line in this case. You can notice that the uptrend line has positive slope – it’s moving up. You can also find short body candlesticks, doji candlestick or hammer candlestick near the trendline.

As I already described on the support and resistance page , do not expect that the price will stop the pullback right on the support line. You have to think about it as a price support zone.Example for downtrend:

Example for downtrend:

The trendline for downtrend connects the first two major highs. The second high must be lower than the first high. Then, the third important high has been created just around the downtrend line. It works as the resistance line in this case. You can notice that the downtrend line has a negative slope – it is moving down. You can also find the same short body candlesticks as on an uptrend line.

! My trend lines tips

Please remember that every support can be broken! The same applies for resistance.

When you can draw a line through more than two important lows or highs (three or more), then it’s a much stronger support line. Bounce from this line or a break from it could be a very good stock trading opportunity.

When a trendline meets with a moving average, then that point is a much more important level of support or resistance.

Return from Trendlines to stock chart analysis

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