Trendlines

Breaking through support or resistance levels results in a change of traders’ expectations (which causes supply/demand lines to shift).

This type of a change is often abrupt and «news based». Such changes may have a certain trend. A trend represents a consistent change in prices. Trends differ from support/resistance levels in that trends represent change, whereas support/resistance levels represent barriers to change.

An Uptrend is defined by successively higher low-prices. A rising trend can be thought of as a rising support level: the bulls are in control and are pushing prices higher. A Downtrend is defined by successively lower high-prices. A falling trend can be thought of as a falling resistance level: the bears are in control and are pushing prices lower.

Just as prices penetrate support and resistance levels when expectations change, prices can penetrate rising and falling trend lines. Volume increases when the trend line has been penetrated. As with support and resistance levels, it is common to have traders’ remorse following the penetration of a trend line. Again, trading volume is the key to determining the significance of the penetration of a trend.

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