Trend Line

A trend line (or trend lines) is a technical analysis charting technique that provides a visual representation of security price trend,  support, and resistance for any time frame.

Trend Line

A trend line (or trend lines) is a technical analysis charting technique that provides a visual representation of security price trend,  support, and resistance for any time frame.  They are used by chartists for both trend identification, trend confirmation and determining the boundaries of price movement.  A trend line can also be referred to as a dutch line as it was first used in the Netherlands.

 

Trend Line Calculation

Support (Uptrend) Line:  A line drawn under local lows and having a positive slope.

Resistance (Downtrend) Line:   A line drawn over local highs and having a negative slope.



Application of Trend Line

A trend line is a line that bounds the price movement of a security and is typically used for timing position entry and exit.  Trend lines are also used to identify a breakout in the direction opposite of the trend line.  This occurs when price action breaks through the principal trend line, providing a visual clue that the existing trend is failing. 



Trend lines can also be used not only with price charts but also with a range of technical analysis charts such as On-Balance Volume (OBV), MACD, and RSI.  Chartists often determine that a trend change is about to occur when there is divergence between the trend line on the price chart and an indicator such as the OBV.

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