Trend Lines Part I

Drawing trend lines is a skill that will help determine the true aim of a stock in the long run. From trend lines we can tell if the stock is taking a temporary dip, telling us it’s time to buy. On the other hand, if the stock is overextended and surging too far above its trend line, it’s a safe bet that you should pull your profits out because sooner or later the stock will begin to gravitate back to its trend line.
The major or “primary” trend line is the line that is a long term one. Often, a stock will have temporary reversal trends that form lines as well. These “secondary lines” should only be temporary and a matter of time before the stock returns to its primary trend line. The last kind of trend line is one that forms on a daily basis. Together these daily lines form the primary trend line when looking at the greater picture.

An upward trend line can be drawn when three or more pivot lows can connect in an orderly fashion. An upward trend should continue if the stock has higher highs and higher lows. Another point to add here is that the best uptrends are formed when the stocks climbs at a 45 degree angle.
Remember that once the stock pivots its way to a lower price the trend has been broken. You should try to draw a trend line as soon as the stock has established two “higher” lows. Try extending the line to view a probable future movement in price of the stock.

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