Invest and Trade Profitably with Jon Johnson

You often refer to “up-trendlines” and “down-trendlines” on stock and index charts. How are they determined and is there any site on the Net where these can be plotted out?

August 30, 2000

We determine the up and down trendlines on our charts. In a very general nutshell, you draw an up trendline connecting a series of higher lows and a down trendline connecting a series of lower highs. That creates a line that is trending higher or lower. Properly drawn trendlines represent support or resistance points for stocks that are trending up or down, respectively. They are of great use in determining a change of character, either to the upside or downside. If we have invested in a stock trending higher along a trendline and it breaks that trendline, that should at least get our attention if not prompt us to action. If it is in a down trendline and breaks that trendline on sharp volume, that is something that may be worth our interest as well in taking positions. Trendlines are very useful in helping us understand why stocks mvoe the way they do and also in giving us some good rules about entering or closing positions. We go over them in detail in our seminar series and how to use them to eliminate a lot of investing mistakes.

As for charting programs on the internet that allow you to draw trendlines, of all of the charting sites I have used, I am not aware of one that allows the drawing of trendlines, at least on a free basis. We are looking at this again to see if there are any new features that have recently been incorporated to allow an investor to do so.

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