Trend Lines Support and Resistance

TREND LINES - SUPPORT &
RESISTANCE
© 2017 BSE Institute Limited
Trends - What are they?
• Trend is the general direction in which a security or

market is headed.
• In this chart the trend is upwards.
TA6/ Trend lines - Support & Resistance © 2017 BSE Institute Limited 2
Trend Line Showing support
Uptrend - What is it?
• Positive / rising slope
• Formed by connecting two or more low points.
• Next low should be higher than previous low.
• Connecting trend line should give a rising or

positive slope.
Uptrend - What does it indicate?
• Acts as support
• Indicate increase in net demand even as price rises.
• Rising price + increase in demand = Bullish
• Strong determination on the part of the buyers.
• Provides opportunity for the sellers to make money.
Prices Above Trend Line
Down Trend – What is it?
• Negative slope.
• Formed by connecting two or more high points.
• The next high should be lower than the previous

one.
• The resultant line should have a negative slope.
Prices Below Trend Line
Lengths of Trends
• Long term trend - lasting more than a year
• Intermediate trend - lasting one to three months
• Near term / short term trend - less than a month
• The longer the trend, the more significant it is
Lengths of Trends
Spacing of Points
• Lows for uptrend
• Highs for downtrend
• Should not be too far apart
• Should not be too close together
• Validity to be always questioned
Angle of the Trend Line
• Steepness of trend line increase.
• Validity of support or resistance decrease.
• Steep trend line:

 Results from sharp advance or decline.
 Over brief period of time.
• Unlikely to offer meaningful support or resistance

levels.
Angle of the Trend Line
Internal Trend Lines
Support and Resistance
• Represents key junctures where supply and demand

meet.
• A security seldom moves below support or above
resistance levels.
• Excessive demand – prices move up
• Excessive supply - prices move down
• Support is the price level at which buying is still
strong.
• Resistance is the price level at which selling is still
strong.
Support and Resistance
Why are they Important
• Important in terms of market psychology and

supply and demand.
• Lot of traders are willing to buy at support and sell

at resistance levels.
• Trend lines broken- market psychology shifts.
• Normally round numbers are psychological support

/ resistance points.
Logic for Support
• When price declines towards support level demand

increases.
• Sellers are less inclined to sell.
• By the time prices reach support level, demand

overcomes supply.
• This prevents prices from falling further.
Play at Support Level
• Support cannot hold for ever.
• If prices break below support level-bears have won

over bulls.
• Prices above support level - willingness to sell, but

resistance to buy.
• If support is broken, new lower support level has to

be established.
Logic for Resistance
• When price increases towards resistance level,

supply increases
• Buyers are less inclined to buy.
• By the time prices reach resistance level, supply

overcomes demand.
• This prevents prices from rising further.
Play at Resistance Level
• Normally resistance above current price.

• If price breaks above resistance level-bulls have won over
bears.
• Price just below resistance level - willingness to buy, but
resistance to sell.
• When price reaches resistance level, supply overcomes
demand.
• This prevents price from rising over resistance level.
• If resistance is broken, new higher resistance level has to be
established.
Establishing Support and Resistance
Three methods:
• Highs and Lows
• Support equals resistance
• Trading Range
Highs and Lows:

• Support established with previous reaction lows
• Resistance established with previous reaction
highs.
• Support equals resistance.
• Support can turn into resistance and vice versa.
• Price breaks below support.
• Broken support can turn into resistance.
• This signals that supply has overcome demand.
• When price advances above resistance, it shows increased

demand.
Trading Range:
• Determines support and resistance and the turning
points.
• When prices move within a range, shows evenly

balanced demand and supply.
• Break below range – Bears win
• Break above range - Bulls win

THANK YOU
© 2017 BSE Institute Limited

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TREND LINES - SUPPORT &

• Trend is the general direction in which a security or

• Positive / rising slope

• Formed by connecting two or more low points.

• Next low should be higher than previous low.

• Connecting trend line should give a rising or

• Indicate increase in net demand even as price rises.

• Rising price + increase in demand = Bullish

• Strong determination on the part of the buyers.

• Provides opportunity for the sellers to make money.

• Formed by connecting two or more high points.

• The next high should be lower than the previous

• The resultant line should have a negative slope.

• Long term trend - lasting more than a year

• Intermediate trend - lasting one to three months

• Near term / short term trend - less than a month

• The longer the trend, the more significant it is

• Lows for uptrend

• Highs for downtrend

• Should not be too far apart

• Should not be too close together

• Validity to be always questioned

• Steepness of trend line increase.

• Validity of support or resistance decrease.

• Steep trend line:

• Unlikely to offer meaningful support or resistance

• Represents key junctures where supply and demand

• Important in terms of market psychology and

• Lot of traders are willing to buy at support and sell

• Trend lines broken- market psychology shifts.

• Normally round numbers are psychological support

• When price declines towards support level demand

• Sellers are less inclined to sell.

• By the time prices reach support level, demand

• This prevents prices from falling further.

• Support cannot hold for ever.

• If prices break below support level-bears have won

• Prices above support level - willingness to sell, but

• If support is broken, new lower support level has to

• When price increases towards resistance level,

• Buyers are less inclined to buy.

• By the time prices reach resistance level, supply

• This prevents prices from rising further.

• Normally resistance above current price.

• Highs and Lows

• Support equals resistance

Highs and Lows:

• Support can turn into resistance and vice versa.

• Price breaks below support.

• Broken support can turn into resistance.

• This signals that supply has overcome demand.

• When price advances above resistance, it shows increased

• When prices move within a range, shows evenly

• Break below range – Bears win

• Break above range - Bulls win

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