Trendlines, what they are

Trendlines are a simple and eloquent method of determining what the pulse of a security or market is at a given period of time.

With a trendline you can form channels which give an indication of the range of price for support and resistance levels in an effort to trade the range.

Trendlines are not a sentiment indicator although by drawing a trendline you can gauge direction and a sense of momentum or a lack of it in sideways markets.

Stocks and markets are characterized by their price action which is driven by institutional investors and to a smaller degree individual investors. The extremes in price that occur during run ups to the upside and sell offs to the downside form highs or lows which become support or resistance points which are also known as pivot points.

Not all pivot points become important gauges of market sentiment in the long term although they all tell of the struggle between buying and selling and in the short term may be of significance.

Pivot points on a monthly chart are more important gauges of strength or weakness than a weekly chart and a weekly chart is more important than a daily chart and so on.

A seemingly volatile trend on a hourly or daily chart may well get lost in the big picture of a weekly or monthly chart so always keep that in mind when considering the context of the chart you are looking at.

Trendlines are perhaps the most perfect timing tool for entering or exiting a market that exists. Like any tool it takes some time to appreciate their value. All indicators such as Moving averages and stochastics are lagging indicators waiting for price activity to occur and then smoothing the relationship out over time to attempt to quantify and place trend in perspective. If trendlines are drawn correctly and we interpret the chart correctly there is no more perfect timing mechanism.

As the name of the web site indicates we utilize trendlines to help ascertain where and when a stock will break out into higher territory or break down in price.

Trendlines are simple expressions of the price points of intersection, much like a mathematical formula. It is said that math can be used to express all things in nature. Music has its melody which is expressed in mathematical equivalents. All things in our physical world can be expressed in dimensional forms. So too can a stock or a given market.

Trendlines are one simple way to gauge the relationship of price, in time, to price and timing.

Most investors know of the maxim buy when a stock or market is making higher high's and higher lows. This indicates strength within the security or market. The reverse is also true that one should sell lower highs and lower lows. This indicates weakness within the security or market.

A trendline is a kind of connect the dots attempt at uncovering reversals in trend or breakouts of consolidation patterns.

There are lateral or horizontal trendline breaouts that occur and there are sloping trendline breakouts either of the ascending or descending type. There are trendline's that we begin from a bottom and there are trendline's that we begin from a top.

A trendline once drawn will continue to the next top or bottom pivot point or high or low in price. For simplicity's sake high prices are usually connected to high prices and low prices are usually connected to low prices to form the trendline channel. There it will intersect with the high or low and continue on. These intersections at price form the foundation of a trendline or trend. A trend is the continuation of a price pattern in a given direction. The range of that price pattern will vary significantly from security to security or market to market.