3 Simple Trend Line Rules
Trend lines used for support and resistance may have varying degrees of technical significance. Here are three simple rules to use to determine how much significance a trend line has and how much attention to pay to a breach.
The stronger the line, the more important the breach.
Thus a line which is close to horizontal, very often tested, and very long held would be the most significant.
A line which is steep, only tested a very few times, and not long held offers very little technical significance.
On the monthly S&P500 chart, the green line has more technical significance than each of the yellow lines. The green line has a more shallow slope and is much longer held, although it has only been tested three times.
This analysis is published @ 05:08 a.m. EST.