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Stock TrendlineFundamental and Stock Technical Analysis , What and When ?
Using Support and Resistance.

Let us today discuss how can we use Stock Trendlines to use Support and resistance levels and make better Entry or Exits .

What is a Stock TrendLine ?

A stock trendline is a straight line that connects two or more price points and then extends into the future to act as a line of support or resistance. In the Uptrend , we join two low prices points and in Downtrend we join two high prices and extend it further . Next time when prices approach them - Stock Trendline should probably act as Support or resistance point .

Let us see one example of each Stock Trendline of them.

Example of trend line while DOWNTREND

You can see in the chart how Stock Two high prices were joined and the line acted as Strong Resistance in future , 3 times prices touched it and broke down again , These are good price area where either one can go Short (sell) , or book there profits . You can see that now prices are again Approaching to this Resistance line ,so once prices reach this point , it may provide a good opportunity to sell .
What will happen exactly , better not to predict and let market decide .

Understand that we are not saying that prices has to necessarily touch the Resistance line and then go back down , the stock trend line only provides Resistance , it may again go back much before touching it .

Example of stock trend line UPTREND

Below if the 2 yrs Stock chart of HIND LEVER , Let us try to make a Stock trendline which acts as support .

If you see the stock trendline chart , i have connected two low prices and extended it in future , you can clearly see how stock trendline acted as support area and prices went back up from there , At the end , you can see how prices are again approaching this support area , most probably this will again hold and it should be a good BUY 

Let us see one more example for Stock Trend lines . This example will show us following things :

- Resistance line using trend line .
- Breakout
- How Resistance once broken became Support
- Resistance line using trendline for shorter time frame .

Let us see a 2 yrs stock trendline chart of JAIPRAKASH ASSOCIATES

You can see here how i joined two HIGH Points and extended the Stock trendline in future , and how prices reacted to this Resistance line . Recently Prices broke out of this resistance line and then this same resistance line acted as Support line and prices bounced back from there .

Also you can see a small Stock Trendline , which was made joining the low points . you can see how prices bounced up as this support line held the prices . So , we have seen some examples of Stock Trend lines and how they can act as Resistance or Support lines (as per situation) .

Some of the important points Stock Trendline to note are :

- Its more of an art to make a Stock trendline  - it depends how you make them using HIGH PRICE , CLOSE PRICE etc .

- You can make Trendline for any time frame.

- Its not necessary for prices to touch stock trendlines , you should not expect it .

- Its a wise decision to BUY OR SELL using trendlines . If trade goes in your favor , let your profits run , if it fails, cut your losses short and accept it . there is no problem with being wrong . even the best in Industry fail .

- Trendlines will be of no help unless you control your GREED in markets . dont put all your money in a single trade . Keep adequate cash for bad times .

- Once trendlines are broken , take it seriously , it has happened for a reason  .

- Make sure that the two points used to make stock trendline are not very near , there should be some time gap between them to believe in them .

- More times stock trendline is touched by the price stronger it becomes , And stronger is the break out from that trendline .

Test for you  

Below is a chart , and I have drawn several Stock trendlines in different time frames , I have marked some points with 1,2,3,4,5 , please tell me what are each of them and comments on each point . please do it individually . Let me see who comments correctly on each of them . Also tell me if there is any other trendline which could have been made , but i have left it ?

Please comment on this Stock Trendline article , did you like it ? Was it easy to understand ? Is it too difficult to useStock Trendlines ?

Conclusion :

So we end this Article here , We saw Importance of Support and Resistance and how to make trendlines and use them . In the next part (last part) , we will see how we can use some of the Indicators from technical Analysis to make decision better .

Also , we can see that even by visual inspection we can get some idea about which area is support and resistance area .

For people interested in learning these things in detail , I would recommend a book “How to make money trading with Charts” by Ashwini Gujral .