Trendlines – Analysis and Forecast – April 28, 2024

trend line A line drawn at historical price levels that predicts the general direction the indicator is heading and indicates support/resistance.

Drawing trend lines is a very subjective matter. The best test of whether a trend line is valid is usually whether the trend line is good. In an uptrend, a trend line should connect relative lows on the chart. The line connecting the lows of the long-term rally would be a support line that could provide a bottom for a partial retracement. A downtrend line connecting the relative highs on the chart similarly serves as resistance to a short-term advance.

Since two relative highs or lows lie on the same line, it is possible to draw a temporary trend line between the two points. Traders can use provisional trend lines as indicators of the location of support or resistance levels, but they are not yet confirmed to be valid until the provisional trend lines remain as support or resistance levels.

Of course, the more times a trend line is maintained, the stronger it will be in the future. If a single line can connect four or five relative lows, the next pullback is likely to break out of that line.

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