Trendlines

Trendline

If we actually apply a ruler to a number of charted price trends, we quickly discover the line that most often is really straight in an uptrend is a line connecting the lower extremes of the Minor Recessions within these lines. In other words, an advancing wave in the stock market is composed of a series of ripples, and the bottoms of each of these ripples tend to form on, or very close to, an upward slanting straight line. The tops of the ripples are usually less even; sometimes they also can be defined by a straight line, but more often, they vary slightly in amplitude, and so any line connecting their upper tips would be more or less crooked. On a descending price trend, the line most likely to be straight is the one that connects the tops of the Minor Rallies within it, while the Minor Bottoms may or may not fall along a straight edge. These two lines – the one that slants up along the successive wave bottoms within a broad up-move and the one that slants down across successive wave tops within a broad down move – are the Basic Trendlines. You draw an Up Trendline by drawing the line one the inner side. You draw a Down trendline by drawing it on the outside. You draw a Sideways Trendline on the bottom.

Source: Edwards, Robert and Magee, John. Technical Analysis of Stock Trends 9th Edition; (c) 2007.