What are you referring to by "down trendlines", and exactly what do they represent? You seem to refer to them being of importance when a stock is in the midst of heading "upward". Are these points of resistance? (December 27, 2000)

  Down trendlines are formed much the same as up trendlines, they just head the opposite way. Any line is formed by connecting at least two points. Down trendlines are formed by connecting the highs a stock or index makes. The more points on a trendline, the stronger it is. As noted in the summary tonight, some highs can be tossed out if a sharp rise is made that quickly fails. That forms a new trendline, but if the former trendline resumes, that shows its strength.

When a stock or index approaches a down trendline, it is running up toward resistance. If that down trendline coincides with other resistance in the form of price consolidations or a 200 day moving average for example, breaking that resistance will be very difficult. It takes a lot of volume to break down trendlines for good. One of the most powerful signals of a reversal is a gap over a down trendline on strong volume. In October 1999, the Nasdaq gapped over a short down trendline on massive volume, setting off the rally that carried the index to 5048. That down trendline was of very short duration, nothing like the 10-month longer term and 4-month downtrends on the Nasdaq right now. It will take a big shift in character to break those downtrends. A friendly Fed and softer monetary policy (e.g., tax cuts) would help that.


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