Stock Market · Technical Analysis

Trendlines

What is a trendline?

A trendline is a straight line drawn on a chart that connects a series of price points, either highs or lows, to visually represent the direction and strength of a trend.

Uptrend line (support trendline)

In an uptrend, price makes higher lows. Connect at least two of these higher lows with a straight line. The line acts as dynamic support. Each time price pulls back to this line, buyers have been stepping in.

> The more times price touches a trendline without breaking it, the more significant and trusted that line becomes.

Downtrend line (resistance trendline)

In a downtrend, price makes lower highs. Connect the lower highs. This line acts as dynamic resistance. Rallies stall here repeatedly.

Rules for drawing trendlines correctly

1. Use at least 2 points to draw, 3+ to validate

2. Use candle wicks or candle bodies consistently, don't mix

3. Don't force a line to fit, if you're adjusting it constantly, it's not a valid trendline

4. Steeper trendlines (>45°) are harder to sustain and break more easily

5. A shallower, longer trendline is more reliable

Trendline breaks

When price breaks through a trendline with conviction (a closing price clearly through the line, ideally on high volume), the trend may be over. This is one of the primary ways traders detect trend reversals.

3+ touchesthe trendline is considered validated and reliable

Fan lines

When a trendline breaks, sometimes a new, less steep trendline forms. Then that breaks, and an even flatter one forms. These are called fan lines. Each break weakens the trend further until it finally reverses.

Takeaway. Connect higher lows in uptrends (support) and lower highs in downtrends (resistance). 3+ touches validate the line.