Drawing lines are divided into trend lines and horizontal lines.
A trend line needs at least two points to be established, and a horizontal line can be established with basically one point.
Both trendlines and horizontal lines have the meaning of identifying the direction of price movement and support and resistance. See Figure (1):
figure 1)
It is emphasized here that its support and resistance is not a specific price, but an approximate price area, and it has a certain degree of subjectivity.
According to different meanings, we can divide the line drawing into: support line, resistance line, inflection point line, channel line.
The trend lines and horizontal lines with support function are collectively called support lines, and the trend lines and horizontal lines with resistance function are collectively called resistance lines.
Adding the trend line and horizontal line of the breakthrough concept, we can see it as the inflection point line. See Figure (2):
figure 2)
Channel lines are also called pipeline lines, and there are parallel channel lines and non-parallel channel lines.
Parallel channel lines, common ones are: rectangle and flag.
Non-parallel channel lines, common ones are: triangle, wedge, etc. See Figure (3):
image 3)
From the perspective of price movement, interpret the meaning of the trend line.
The larger the angle of price movement, the greater the slope of the price movement, and the larger the slope, the stronger the momentum driving the price. See Figure (4):
Figure 4)
Changes in the strength of price momentum can be identified based on changes in the slope of the trendline.
In an upward trend, the angle of price increase changes from small to large, indicating that the upward momentum changes from weak to strong, and the speed of price movement changes from slow to fast, indicating that the price rise is strong and may be accelerating to catch up to the top.
Conversely, if the angle of price rise changes from large to small, it indicates that the upward momentum has changed from strong to weak, and the speed of the price has changed from fast to slow, indicating that the price rise is weak, and there will be an adjustment or stage peak. See Figure (5):
Figure 5)
It is worth noting that the slope change of the trend line needs to be comprehensively studied and judged in combination with the position of the price in order to better predict the future price trend change.
The top divergence and bottom divergence of the channel line can be used to judge the price callback or rebound in advance.
The composition of the channel line is composed of two drawn lines, and the parallel channel line is composed of two horizontal lines or two trend lines. Non-parallel channel lines consist of a trendline and a horizontal line, or two trendlines that are not parallel.
Here we call the other drawn line of the channel combined with the upward trend line the upper channel line, and the other drawn line of the channel combined with the downward trend line as the lower channel line. See Figure (6):
Figure 6)
Regardless of whether it is a parallel channel line or a non-parallel channel line, its composition can be directly and simply regarded as the composition of the upper channel line and the lower channel line.
But the clearer expression is the channel line composed of horizontal line and trend line, which mainly emphasizes the trend direction of price movement. With the direction, we can identify the top divergence and top divergence of the price.
For example, the channel line of the upward trend, the upper channel line has the function of resistance, and the price is prone to divergence when it touches the upper channel line, which indicates that the price may have a callback or peak at the stage high. See Figure (7):
Figure (7)
In the upward trend channel, we can find the upper channel line parallel and non-parallel to the upward trend line. The upper channel line has a resistance effect. When the price touches the upper channel line twice or more, it can be regarded as the top deviation of the price, and the price is prone to short-term At the top of the callback or stage, at least the price is near the upper channel line, so we should not easily go chasing higher and doing long.
The bottom divergence of the channel line appears in the downward trend channel, which is consistent with the judgment principle of the upward trend channel, and the direction is opposite.
The breakthrough of the inflection point line is divided into the breakthrough of the horizontal line and the breakthrough of the trend line.
The breakthrough here is relatively easy to understand, but in actual trading analysis, we often encounter such a situation: breaking through the trend line does not mean breaking through the horizontal line, or breaking through the horizontal line does not mean that the trend line has also been broken. See Figure (8):
Figure (8)
The reversal of the downward trend in the figure is first the breakthrough of the downward trend line, followed by the breakthrough of the horizontal resistance line, which further establishes the probability of trend reversal. Of course, the breakthrough of the downward trend and the breakthrough of the horizontal line does not mean that the trend rebounds, but it can be regarded as an early warning signal.
The above are the basic knowledge points that are more commonly used in line drawing analysis. I hope everyone can master them proficiently and use them flexibly.
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