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by Jayanthi Gopalakrishnan
Trendlines act as support and resistance levels in trending markets. They can be effectively utilized to determine entry and exit points.
Position: N/A
Jayanthi Gopalakrishnan
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Trendlines
05/16/00 10:57:06 AMby Jayanthi Gopalakrishnan
Trendlines act as support and resistance levels in trending markets. They can be effectively utilized to determine entry and exit points.
Position: N/A
| A trendline is a straight line that joins either the tops or bottoms on a price chart. In an uptrend they are drawn through the price bottoms and act as a support level. During a downtrend, a trendline is drawn by connecting the price tops. In this case they act as a resistance level. A break in the trendline indicates a slowdown of the trend or a reversal. |
| An example of how to utilize them can be seen in the chart of Intel Corp. [INTC]. Here you see an upward and downward sloping trendline. Notice a break in the upward sloping trendline on April 11, 2000, after which you can see a trend reversal. This break would have been an ideal point to exit your long positions in this stock. |
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| An upward and downward sloping trendline can be seen in this chart of Intel Corp. [INTC]. A break in the trendline indicates a slowing or reversal of the existing trend. |
| Graphic provided by: Window. |
| |
| The stock is presently in a downward trend and it is a matter of waiting for a break in this downward sloping trend before entering a long position. However, if you notice resistance at this trendline, then this would be an ideal point to short the stock. To protect your losses, place a stop half a point above the trendline. |
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