O'Reilly logo

Candlestick Charting For Dummies® by Russell Rhoads

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

Using Trendlines

Trendlines can be the most basic of all technical indicators. A trendline is exactly what it sounds like: a line on a chart that shows the general direction a stock is trending. If a stock is moving up in price, its trendline slopes upward from left to right. If a stock is trending down in price, its trendline slopes downward from left to right.

In this section, you discover how to draw a trendline on a chart. Also, some hints on how to determine the direction (up or down) are given. Finally there’s a quick overview of how machines (a computer) can draw trendlines for you.

Drawing trendlines

Trendlines seem pretty straightforward, but drawing a trendline can be tricky. Based on how you think a stock is performing, you draw a line of support (in a bullish case) or a line of resistance (in a bearish case).

You can construct a trendline with nothing more than a printed out chart, a ruler, and a pencil. If you can’t find a ruler, just close this book and use the spine. Anything that allows you to draw a straight line between two points will do. To draw a trendline, simply draw a line that connects two or more low price points (for an upward trending line) or two or more high price points (for a downward trending line). Figure 11-1 shows a prime example of a trendline.

Don’t let the ease of trendline construction fool you into thinking that trendlines are simple ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required