- Support & Resistance
- Uptrend Lines
- Downtrend Lines
Support & Resistance
Support and resistance are generally somewhat horizontal. Support acts like a floor
for stock prices (reversing the previous downward move). Resistance acts like a
ceiling (reversing the previous upward move). See the example below of Wal-mart
stock.
Uptrend Lines
Uptrend lines slope upward and connect the major low points. Buying near the uptrend
line with stops below can be a great way to trade with the trend. See the uptrend
line of Lockheed Martin below. An uptrend is usually confirmed as being broken when
a body of a candle closes below the trend line.
Downtrend Lines
On the other hand, a downtrend is drawn by connecting the major highs together as
shown below. See the downtrend line on Ford stock. There’s no need to buy a stock
that’s in a clear downtrend. It will typically break the downtrend and go sideways
for a bit before turning upward or heading downward again. A downtrend is usually
confirmed as being broken when a candle closes above the downtrend line.
