How to Draw Trend Lines

Whether you are a beginner or an advanced technical analyst, the easiest and most commonly used auxiliary line is trendlines. Drawing trendlines can help us determine the current trend of stock prices, as well as the support and resistance during the trend development. How to draw trendlines? Let's take a look at a practical example below.

Assuming we have a chart as shown below, we can see that the overall stock price trend is downward. To facilitate observation of the trend changes, we can draw a trendline.

The trendline drawn by connecting the high points can act as a resistance line, and the trendline drawn by connecting the low points can act as a support line. If the stock price breaks through the resistance line, it means that the price is likely to continue to rise. If it falls below the support line, it means that the price may continue to decline.

These two trendlines, one support line and one resistance line, wrap the price into a channel, which is another form of trendlines: channel lines.

When the trend remains strong, the price tends to fluctuate within the channel. However, when the price breaks through the support or pressure line of the price channel, the trend may be broken.

In a descending channel, if the stock price breaks through the upper parallel line, it may mean that the original downward trend is broken, and it may be considered to adjust the investment strategy to be biased towards 'call'.

You can also directly select a channel line tool, lock in three key prices, and draw a channel line.

It should be noted that the more prices connected by the trendline, the more reliable the trendline drawn tends to be.