A trendline is a straight line connecting multiple points on a chart. A trendline is used in technical analysis to determine the direction and strength of a trend. An up trendline has a positive slope and connects at least two low points on a chart. A down trendline has a negative slope and connects at least two high points on a chart. The magnitude of the slope of a trendline, or steepness, indicates the strength of the trend. When the time frame covered by a trendline becomes large, the chart may be replotted using a logarithmic scale for the price axis.
A trendline can be extended beyond the available data to indicate potential areas of support (for a trendline that connects price lows) and resistance (for a trendline that connects price highs). If the price moves below support or above resistance, it can indicate a potential change in trend. |
