“Seeing lots of trendlines being drawn these days. Please note that trendlines need at least three valid touches to be significant.”
— Walter Deemer, @WalterDeemer
An up trendline is drawn by connecting higher lows. It represents support and may exert a positive influence on price. A down trendline is drawn by connecting lower highs. It represents resistance and may exert a negative influence on price.
As you can see above, on my daily candlestick chart of Starbucks (SBUX), trendlines provide important information, especially when they are tested. They are not drawn in stone, but are valuable arrows in a chartist’s quiver.
Remember, even in these days of computer-driven algorithmic trading, technical analysis is as much art as science.
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