After the first trend line break, we discovered that a change in trend was not going to occur, so we drew another one at this point. After that, we would just wait for another touch of the line and look for a reversal pattern to establish a position.
Here are some more trend line tips:
The more times a stock touches a trend line, the more significant it becomes.
It takes two touches to draw a trend line, but 3 to confirm it as being a valid one.
In a down trend, draw the line along the highs of prices.
The steeper the trend line, the less reliable it will be.
A trend line break does not mean that the trend will change.
In conclusion...
I have a confession. I don't draw trend lines very often! After you have looked at thousands of charts, you can see them without having to actually draw them in. And I certainly would never buy a stock just because it is hitting a trend line.
They are just a piece of the puzzle. |
