Drawing the Path to Profit: The Art of Trendlines and Channels

The Geometry of Trendlines

In a bull market, connecting the lows of minor waves often forms a straight line—the Uptrend Line. In a bear market, connecting the tops of waves forms the Downtrend Line.

Judging Validity

Not all lines are equal. Criteria include:

Number of touches: The more times prices touch the line without breaking it, the stronger it is.

Length: The longer the line holds, the more significant it is.

Angle: Lines that are too steep are easily broken; a slope of roughly 30 degrees (on semi-log charts) is often more sustainable.

Confirming a Breakout

How do you know the trend is over?

Closing Price Rule: It must be a closing price penetration, not just intraday.

3% Rule: The price should break the line by at least 3%.

Volume: Upward breakouts usually require expanding volume; downward breaks do not necessarily need volume.

Scales Matter

For long-term trends, use Semi-logarithmic Scale charts. They reflect percentage changes, making long-term straight-line trends more meaningful.