Out of the charting tools that I tend to use most frequently, the Trendline Tool is the easiest tool to place on a stock chart. The appealing nature of the Trendline Tool is its simplicity. Even the most green, newest beginner can use and apply a Trendline Tool with better than average success. In this section though, I hope to show you some more advanced techniques when using Trendlines.
Before I begin, let's summarize the different types of Trendlines. Here at Trendy Stock Charts, I mostly talk about 3 types of Trendlines - Supporting Trendlines, Resistance Trendlines and Main Supporting Trendlines.
- Supporting Trendline - a trendline that is found below or lower than a stock's current share price
- Resistance Trendline - a trendline that is found above or higher than the stock's current share price
- Main Supporting Trendline - a trendline that has been respected since the stock's current uptrend began
The reason I don't include Main Supporting Trendlines with the Supporting Trendline group is that I have some slightly different rules for Main Supporting Trendlines. Therefore it is important to distinguish between a regular Supporting Trendline and a Main Supporting Trendline.
The various components for a Trendline Tool include:
- 2 Anchor Points - Anchor Points are used to place the Trendline Tool on a stock chart.
- Trendlines - A straight line (trendline) is automatically drawn between the 2 Anchor Points as the 2 Anchor Points are being placed on the stock chart.
The illustration shows 2 different trendlines, 1 for a downtrend and 1 for an uptrend. Their Anchor Points and their resulting Trendlines would look something like this:
Just like the other Charting Tools I cover, the Trendline Tool can be used on candlestick charts covering different lengths of time such as 5 minute charts, hourly charts, daily charts, weekly and even monthly charts.
Pull up a candlestick chart of a stock that is trending upwards in order to determine where its main supporting Trendline is positioned.......
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