Drawing Trendlines in a Support and Resistance Channel
Support and resistance can take many shapes. Sometimes it is a horizontal
line across support and many times it takes the shapes an angled channel.
The drawing of the trendlines is basically the same. You draw them across
the bottom support. Many times you will find the resistance trendline as a
parallel line.
It is a good idea for a trader to be drawing trendlines on their charts to
help them visualize these support and resistance areas. The chart below
does not have trendlines drawn on them. You should print them out and draw
your own.
Let’s look at Apple Computer (NASDAQ: AAPL).
Print out this chat and let’s draw these trendlines on AAPL.
By looking at the chart below, a trader would draw a Support trendline across
the recent support at 110 and short-term resistance at 120.
Despite some of the biggest selling in NASDAQ and computer stocks, AAPL is
trying to hold up.
Can it? That is the question.
The way to play this is to play the breakout of support and resistance over
the past few days of trading.
Buyers have come in to AAPL in the 110 area and sellers are selling at 120.
A support and resistance trader will let the market tell him which way AAPL
will break.
This is done by placing a Buy stop at 120 � and also entering a Sell Short
if AAPL drops below 109 �.
Whichever way AAPL goes in the morning, a trade can be entered in the
direction of the trend.
I would place my stop 3 points from entry, after the trade is entered in
either direction.
AAPL looks like it wants to go lower, but wait for confirmation.
