Tina Logan Guide To Trendlines PDF

TINA LOGAN’S GUIDE TO USING TRENDLINES - 1
Tina Logan’s
Guide to Using Trendlines
Disclaimer and Waiver of Claims: The discussion that follows is purely educational in
nature. It was designed and intended to assist readers in increasing their knowledge of
chart analysis. Any reference to specific stocks is for educational and illustrative purposes
only and should not be construed as advice to buy or sell those stocks. Tina Logan is not a
stockbroker, broker dealer or investment advisor and makes no recommendation on specific
stock transactions. Trading in the stock market involves a degree of risk that may result in
financial losses.
Charting is partially skill and partially an art; some of the content of these materials is
subjective in nature. There is no guarantee these methods will suit your trading style and
personality, but rather are intended to serve as a model.
All rights reserved: The content of this e-book is the property of Tina Logan. This copy is for
your personal use only. The information shall not be copied, forwarded or distributed; or
used by any other person or organization in any publication or training medium; without
written permission from the author.
Property of Tina Logan – Trader’s Roadmap www.tradersroadmap.com (Rev. Nov 2006)

All Rights Reserved ©. May not be duplicated or distributed without permission
GUIDE TO USING TRENDLINES

Many beginning and intermediate level traders have overlooked a simple yet effective
charting tool: the trendline. Many aspiring traders don’t draw them at all, and equally as
many that do draw them do so incorrectly.
The lack of attention or understanding in this area may be due to the fact that many
technical analysis publications do not give a tremendous amount of detailed instruction
or illustration on drawing trendlines. This e-book was developed with as much detail as
possible with the goal of answering all of your questions and helping you to put this
important technical tool to work.
When you first begin drawing trendlines, it may feel awkward. But with the guidelines
provided here, and plenty of practice, you’ll make steady improvement. Eventually it will
become second nature for you -- you’ll be able to just glance at a chart and determine
the strongest lines. Even so, I still recommend drawing the physical lines on the charts.
A trendline is one of the most basic charting tools available to traders. Trendlines can
be used to determine the following:
1. Support and resistance levels.
2. The trend direction and also when a trend has changed direction (see BRCM
example on the following page).
3. If a chart pattern is present.
This e-book includes detailed discussion of each of these important uses for trendlines
and instruction on how to properly draw the lines. For illustration purposes only, the
examples and images used throughout this e-book are taken from Telechart. Most
trading platforms offer similar processes and tools for drawing trendlines.
There are different methods and schools of thought on drawing trendlines. The classic
method of drawing trendlines involves touching the lines to pivot points. That is the
method referenced in this instruction. If you are unfamiliar with pivot points (peaks and
bottoms), they are covered later in this e-book.
In his book Trader Vic - Methods of a Wall Street Master, Victor Sperandeo
discusses an interesting application of trendlines for determining trend
change. His method is called the 1-2-3 change of trend. I recommend
reading his book once you have a good foundation of technical analysis under
your belt; it is well worth the time.

Why should you want to learn how to use trendlines? Because it will dramatically
improve your understanding of support and resistance; as well as improving your
pattern and trend recognition skills. Something as simple as obeying a strong trendline,
selling when price declines below strong support, could have saved Americans billions,
yes billions, of dollars when the Nasdaq topped out in 2000. In order for a stock to fall
from $100 to $10, it certainly had to have broken at least one significant trendline. Rest
assured that the trendline was broken much closer to the $100 price than the $10 price.
The chart below of Broadcomm Corp (BRCM) shows price action from late 1998 to late
2002 on the weekly time frame. Having employed even a simplistic exit strategy, such
as selling when the stock closed below the rising trendline on the weekly chart, would
have helped traders and investors avoid holding the stock into a downtrend. The stock
lost over 94% of its value from March 2000 to October 2002.
Having used protective sell stops also would have kept traders from holding into that
decline. Optimistic traders had grown so accustomed to stocks going up that most were
caught by surprise when the Nasdaq bubble burst. Many were not using prudent risk
and money management practices and gave back a significant amount of their profits
before finally exiting. Some are still holding stocks that fell from triple to single digits.
Broadcomm Corp (BRCM)

Weekly Chart
Break of 1998-2002
Strong Rising
Trendline A significant trendline was
broken on the weekly chart
at approximately $138.
Note also that a bearish
double top pattern was
setting up as the trendline
was broken, another
warning that a trend
reversal may be under way.
Telechart
Notes:

TRENDLINE DRAWING TOOLS

Part of making a habit of drawing trendlines is getting comfortable with the drawing tools
in your charting program. Below I discuss how to use Telechart’s trendline tools. If you
use another charting program, I encourage you to review these instructions and take the
ideas to your charting platform. Most mainstream charting programs have similar
drawing tools.
Draw a Trendline:
In Telechart, trendlines can be drawn in the chart window but not in the two indicator
windows. To draw a trendline in the chart window I use the hot key method:
1. Press the letter “D” on the keyboard (think of “D” for

“Draw”). A crosshair will appear.
2. Click in the chart window at the beginning point for

the trendline.
3. Drag the trendline to the desired ending point.
4. Release the mouse.
Once you release the mouse, the crosshair will

disappear. If you wish to draw another trendline, press
the letter “D” again and follow the steps above.
Erase a Trendline:
The quickest way to erase a trendline in Telechart is to use the hot key method: Ctrl +
D. Hold down the control key and press the letter “D” on the keyboard. This method
erases the most recently drawn trendline. If you have drawn several trendlines on a
chart and wish to delete them all, keep the control key depressed and repeatedly press
the letter “D.” Each line will be erased, in the order they were drawn from newest first to
oldest last, until they have all been removed.
If there are several trendlines on a chart and you only

want to remove one specific line, use the following
steps:
1. Point the mouse at either end of the trendline to be

deleted. A circle will appear.
2. Right click the circle.
3. Select delete.

Move a Trendline:
There is a small circle in the middle of the trendline.

Move the mouse along the trendline toward the middle
until the circle appears. Click the circle, drag and drop
the trendline at the desired location on the chart. The
length and angle of the line does not change, just the
location of the line.
Adjust Length or Angle of Trendline:

There are also small circles at each end of the trendline.
The trendline can be rotated 360 degrees off those
circles. To change the angle or length of the line, point
the mouse at either end. When the circle appears, click,
drag and drop the trendline at the desired length and
slope.
If a trendline is drawn too close to the right edge of the

chart (into the price column), the trendline may pop up or
down a little bit. If that happens, use the circle at the right
end of the trendline to adjust the line.
Create a Parallel Line:

Telechart has a useful tool for drawing
channel lines. It is very common for a stock
to trade in a channel. Price may move
sideways in a fashion where the movement
can be trapped between two parallel
horizontal trendlines. Stocks also form
channels in up and downtrends and can be
captured between two angled parallel lines.
To define a channel using parallel lines: First Line
1. Draw the first trendline.

2. Right click any of the circles on that
trendline.
3. Select Create Parallel Line. Parallel Line
The parallel line is hidden behind the first trendline. It can be revealed by clicking the
middle circle on the first trendline and dragging the parallel line away from the first line
to the desired location. As long as you do not make any adjustments using the circles
on either end of the line, the parallel line will remain perfectly straight and the same
length and angle as the first line.

Trendline Extension:
Your charting program may add an

extension to the trendline. Extensions
can be helpful because they extend the
line you’ve drawn into the past and the
future. In Telechart, the trendline
extension is turned on by default. Extension
Trendline
If you draw a lot of trendlines on some
charts, the extensions can be Extension
bothersome because they clutter the
chart. If you prefer to keep the
extension feature turned off, you can Telechart
quickly toggle it on as needed.
There is a quick way to toggle the trendline extension on and off using the hot key
method: Ctrl + T. Hold down the control key and repeatedly press the letter “T” to toggle
among the following three options:
• Trendline
• Trendline with Extension
• No Trendline
Trendline Color:
You may have the option of changing the trendline color to your preference. In
Telechart you can select from several colors. The color you select should be easy to
see against the background. Since I prefer a white background, I use black or dark blue
trendlines. You may also select the trendline extension color.
From the Telechart main menu:
1. Click on Tools.
2. Select Chart Display Options.
3. Click the Markers/Trendlines tab.
4. Click the down arrow to the right of Show
Trendlines and select the desired color.
5. Click the down arrow to the right of w/extensions
and select the desired color for the extensions.
6. Click OK to apply the changes.

ADDITIONAL DRAWING TOOLS:

There are other drawing tools available in Telechart. On the
toolbar near the top of the screen there is a pencil icon. Click
the pencil to open the drawing toolbar. There are several tools
to choose from including (from left to right):
• Trendline
• Linear Regression Trendline
• Horizontal Trendline
• Vertical Trendline
• Text
• Fibonacci Arcs Drawing Toolbar
• Fibonacci Fan
• Fibonacci Retracements
You can experiment with these tools if you use Telechart. You’ll also find instruction on
their use in the Help menu. For the first tool (Trendline), it is faster to use the hot key.
Just press the letter “D” on the keyboard. Of these additional tools, the one I use quite
often is the horizontal trendline which is discussed below.
Horizontal Trendline:
The horizontal line is drawn like a trendline;
however, until the mouse is released the line can
be moved up and down vertically, the length
changed, and it also remains perfectly straight.
Once the line is dropped on the chart, as long as

you do not adjust it using the circles at either
end, the line will remain perfectly straight. It can
be moved by clicking the circle in the middle of
the horizontal trendline. This feature is useful for
the following:
Horizontal
• Drawing horizontal support/resistance lines. Trendlines
• Providing a visual indication of a protective

stop and/or target levels.

DRAWING CLASSIC TRENDLINES

A peak is a pivot. It consists of three bars with the middle bar’s high being the highest.
A Pivot Not a Pivot Not a Pivot

Lower high on each side These are higher highs These are lower highs
A bottom is also a pivot. It consists of three bars with the middle bar’s low being the
lowest.
A Pivot Not a Pivot Not a Pivot

Higher low on each side These are higher lows These are lower lows
Classic trendlines touch pivot points. In order to be deemed a touch on the line there
must be a pivot present. These lines are sometimes referred to as external trendlines.
A touch on the line is a “test” of support or resistance. As a general rule, the trendline
should touch as close as possible to the actual turning point of the pivot. However,
there will be times when the trendline will breach one or more bars, which will be
discussed later in this e-book.
A trendline is drawn across pivot points connecting one pivot to another. There must be
at least two pivot points (touches) to draw a valid trendline. Ideally there are three or
more touches on the line. Some traders do not consider a trendline to be valid unless it
has at least three touches.
Peak Bottom
Touch High of Pivot Day Touch Low of Pivot Day

Often there is more than one valid trendline that can be drawn. The strongest trendline
is the one that touches the most pivot points. The more touches on the line, the
stronger the trendline is for support and/or resistance and the more significant the signal
when the line is broken. Traders will pay attention when a very strong trendline (many
touches), or a long trendline, has been broken.
A common mistake that I see is when traders attempt to draw a trendline across highs
or lows of price bars neglecting to touch the line to two or more pivot points. This
results in an invalid trendline.
Invalid Trendline Valid Trendline

This line touches higher This line touches pivot points
lows, not pivot points. and connects the pivots.
To count as a touch on the Pivot

trendline price must pivot; Highs Pivot
Highs
however, the more times price
finds support or resistance on a
line, the stronger it is. Once a
valid line has been established, if
there are highs and lows of non-
pivot bars also touching the line it
does strengthen the trendline.
Notes:

A Pivot Near the Line is a Touch:
As long as the pivot point is fairly close to the trendline, it can be counted as a touch on
the line. As a general rule, if the pivot is within about one third of a horizontal gridline
from the trendline (the gridlines shown below are logarithmic scaling), I consider it to be
a test of the line. If it is not very close to the line, do not count it as a touch.
Not a Touch
Touch
Focus on Strong Trendlines:
There are usually several valid trendlines on any given chart. And there will be many,
many two-touch trendlines. In other words, there are many combinations where you
can touch a trendline to two peaks or two bottoms.
If you were to attempt to draw all valid trendlines on most any chart, you’d probably end
up with a cluttered mess. In the example below of Bearingpoint Inc (BE), about a dozen
valid lines are shown. Most of them are two-touch lines, and most of them are not
relevant in regards to the primary purpose for drawing trendlines.
Telechart

Recall that trendlines identify the following:
1. Support and resistance levels.

2. The trend direction and also when a trend has changed direction.
3. If a chart pattern is present.
The two parallel horizontal lines (dashed) on the Bearingpoint chart are the primary
trendlines. This stock is trapped in a trading range. Most of the other lines are more
confusing than helpful.
To avoid drawing a lot of two-touch trendlines that may keep you from focusing on
stronger lines, draw your primary trendlines touching prominent pivot points rather than
minor points. Touch two, and preferably three or more, pivots that stand out enough on
the chart that they’ll be noticed by a large number of traders. If traders can easily see
support or resistance levels, they are more likely to take action at those turning points.
The less prominent pivots won’t usually draw as much attention; however, price may still
stall at or pull back from those points.
Prominent Pivots Less Prominent Pivots
Line Graphs:
When displayed in line graph form, the price line plotted on the chart connects the
closes from bar to bar. Classic trendlines are drawn across pivot points, not across the
closes. Periodically I will shift to a line graph to remove some of the noise on the chart.
However, I do not typically draw trendlines on line graphs, although some traders do.
Notes:

Trendline extended to the right edge:
The bar at the right edge of the chart cannot be

a pivot. There must be lower highs, or higher
lows, on each side of the middle bar in order for
a pivot to be present.
It is okay to extend the trendline to the right

edge of the chart, beyond the last touch on the
line; however, to actually count as a touch there
should be a three-bar pivot.
Trendline extended to right edge.
The current bar is not a pivot.
Violations of the Trendline:
Price may pierce a trendline leaving a shadow on the other side of it. This indicates that
price temporarily pushed beyond the trendline intraday, but was trading back inside the
line by the close of market. The trendline need not be redrawn to touch the actual pivot
point of that shadow unless it will result in a stronger trendline than the line that it
pierced.
Price pierced the trendline Price closed below the trendline.

but closed above it.
Time Frames:
In Telechart, the trendlines drawn on one time frame can be seen on the charts of the
higher and lower time frames. For instance, a trendline drawn on the daily chart across
a support or resistance level will be present on all intraday time frames. This is helpful
because you can easily see the point during the trading day where price broke a
significant resistance (or support) level that traders were watching on the higher time
frame.

In the example below of UT Starcom Inc (UTSI), the stock was trapped in a narrow base
on the daily chart. On intraday time frames, that narrow base looked like a much wider
horizontal channel. When the stock broke out from the base on October 5, 2006, it was
easy to see where, and when, it broke through resistance on the intraday time frames
as well because the trendlines from the daily time frame were present on the intraday
charts.
Breakout
Breakout
Telechart Telechart
UTSI - October 5, 2006 - Daily Chart UTSI - October 5, 2006 – 15-Min Chart
CANDLESTICK PATTERNS AT TURNING POINTS:
It is fairly common to see

reversal candlestick patterns
at, or near, pivot points.
Bearish Engulfing
Traders may use a trendline,
or a previous peak or bottom
(which are touches on a
trendline) as targets or entry
points. Their entries and exits
at these points often cause Doji
certain candlestick patterns to
Doji Tweezer
form. Bottom
Telechart
Notes:

DRAWING TRENDLINES THROUGH PRICE BARS:
Price action is not always clean. In fact, it is often messy and difficult to decipher.
There will be many times when you’ll need to draw a trendline through one or more
price bars in order to identify the area of price congestion.
The goal is to draw a trendline that shows support or resistance along the majority of
the congestion area. In order to do that, you may have to draw the line through one or
more bars.
Drawing a Trendline through a Shadow:

It may be necessary to draw a trendline through
the shadow of a bar. A shadow is a candlestick
term denoting the part of the bar’s range that is
above the close and below the open.
Sometimes you’ll have to clip off one or more
shadows in order to draw the strongest line.
These shadows are false signals caused by
price temporarily spiking above resistance, or
below support, during the trading day.
If it is necessary to draw a trendline through a Trendline drawn through a shadow.

shadow, it still counts as a touch on the
trendline as long as the shadow bar is a pivot.
The most important price action lies between the open and the close (the body of the
bar); however, the shadow may have charting implications. The meaning of certain
price bar formations can be learned by studying Japanese candlestick charting.
Stephen Bigalow is a well-respected candlestick expert who has written two books on
the subject.
Drawing a Trendline through the Body of a Bar:

It may be necessary to draw a trendline
through the body of a bar. The body is a
candlestick term denoting the area between the
open and the close. You may have to clip one
or more bodies in order to draw the strongest
line. However, if the line clips off the bodies of
several bars, there may be a stronger line
outside of those bars that is the more valid line.
If it is necessary to draw a trendline through a
bar’s body, it still counts as a touch on the
Trendline drawn through a body.
trendline as long as the bar is a pivot.

Drawing a Trendline through a Pivot:
Drawing a trendline through a

pivot means clipping off all, or
part, of two or three of the bars
that make up the pivot. I only
recommend doing so in
situations where there is clearly
a stronger trendline to be
drawn.
If it is necessary to draw a
trendline through a pivot, it still
counts as a touch on the Trendline drawn through a pivot.
trendline.
Unless attempting to identify a trading range, which can often have erratic price moves,
I do not suggest drawing a trendline through more than one pivot. If you have to draw
the line through two or more pivots, there is probably a strong line outside of those
pivots that may offer support or resistance for the stock.
Drawing Trendlines to Identify a Trading Range:
If price is in a messy trading

range, you may have to draw a
trendline through many
shadows, bars and even a pivot
or two. This may be necessary
to trap the majority of the price
action between two parallel
channel lines.
Rather than drawing a trendline

across a couple of extreme high
or low pivots, it is best to clip
those and instead identify the Trendlines identify a trading range.
majority of the price congestion.
There may be more than one

strong trendline on each side of
the trading range. In those
cases it is difficult to determine
the precise breakout and
breakdown points for the trading
range.
Telechart

Drawing a Trendline to Identify Past Support and Resistance:
Because trendlines identify areas of support and resistance, it is common for the line to
be touched on both sides. Support and resistance reverse roles -- what was once
support becomes resistance and vice versa.
If looking back into the past to determine strong support or resistance levels that the
stock may encounter again, do not be concerned about drawing a trendline through
price bars. In these situations, you are not trying to determine the trend direction or if a
chart pattern is forming, you are simply looking for historical strong support or
resistance levels that may impact your trade. Therefore, it does not matter how many
shadows, bodies or pivots are breached.
Price found support and

resistance many times near
Resistance the same price level.
It was necessary to draw

the trendline through
several price bars in order
Support
Support to identify this strong line.
Telechart
This type of support-

resistance role reversal
may also occur along an
upward or downward
Resistance
angled trendline.
In the Myriad Genetics

(MYGN) example, the
stock declined in a channel
Support using the prior downward
angled trendline as a
support line.
Telechart

COMPRESSION (ZOOM):
Horizontal compression refers to the time axis. It determines how much price
data is displayed on the chart. In Telechart, horizontal compression is
referred to as the “zoom.” The magnifying glass icons on the main tool bar Zoom
are used to adjust the zoom. The zoom you use may dramatically impact the
trendlines you draw. I use the following guidelines:
Zoom 5:
This is my primary zoom. It is the
one that I use most often when
drawing trendlines and when
scanning through lists of stocks
looking for tradable set-ups. This Primary Focus
view displays about five months of
data on a daily chart.
If there is something tradable on the

chart, you’ll usually recognize it by
looking from the right edge of the
chart back about two to three
months. I tend to focus primarily in Telechart
that area and that’s where many of Primary Focus for Trendlines:
my trendlines are drawn. Right edge to 2-3 months back
There are good reasons behind using this as the primary zoom. First, most
intermediate-term trends last from about one month to about three months. Second,
most large chart patterns range from three weeks to about two to three months. If you
were to analyze charts and draw trendlines looking at less data, you may not identify
tradable patterns or see important trends developing or reversing.
In the Lifecell Corp (LIFC) example below, viewing the chart on zoom 5 you can see
that the stock is consolidating. The trendlines identify a symmetrical triangle. On zoom
7 the duration of the trend prior to the consolidation was not evident.
Telechart Telechart
Zoom 7 Zoom 5
In the Caremark RX Inc (CMX) example below, viewing the chart on zoom 5 you can
see that the stock has been in an uptrend for several months and has just broken a
strong rising trendline. The duration of the trend is not evident looking at zoom 7.
Telechart Telechart
Zoom 7 Zoom 5
Zoom 6 or 7:
These views display about two to three months of data on a daily chart. These zooms
are useful for the following:
• to get a closer look at recent price action.
• for making fine adjustments to a trendline.
When making adjustments to a trendline, try

to fine tune the line so it touches as many
pivot points as possible. Having an accurate
line can make a difference when determining
the following:
• calculating a measured move for a certain

type of chart pattern; the points where I
drop the trendline may make a difference
in the target price.
Telechart
Zoom In:
• determining the breakout point along an Closer look and adjust trendlines.
angled trendline.
Notes:

Zoom 3 or 4:
These views display up to a year or more of data on a daily chart. These zooms
provide a bigger picture of price action. They can be used to look for the longer-term
trend as well as major ceilings (resistance) and floors (support). Often you’ll see a
significant ceiling or floor that wasn’t visible on zoom 5.
Resistance
Telechart Telechart
Zoom 5 Zoom 3
Also you’ll often discover that a trendline you’ve drawn can be extended further back
where price traded at, or near, that area in the past. In other words, the line is stronger
than it had appeared when looking at fewer months of data. The chart below of Foster
Wheeler (FWLT) is a good example. On zoom 5 you can see that there is a zone of
resistance above the current price. When you compress the chart to zoom 3, it is clear
that the stock had used that price level several times as support before breaking down
through it. Remember, support and resistance tend to reverse roles.
Resistance
Support
Telechart Telechart
Zoom 5 Zoom 3
Trader Tip: Another method of viewing the bigger picture is to stay on zoom
5 and shift to the time frame one higher. In Telechart press 5 to shift from
the daily to the weekly time frame. Press 1 to return to the daily time frame.
Or set up one of the twelve chart templates that correspond with the “F”
(function) keys at the top of your keyboard for the weekly time frame. You
can quickly shift to that template at any time to view the weekly chart.

Vertical Compression:
In your charting program, you may also be able to compress the chart vertically. This is
sometimes necessary when drawing trendlines. The price bars may be too close to the
top or bottom of the chart window to draw the trendline to the highest or lowest pivot.
To compress the chart in Telechart,

press the minus (-) key. The price bars
will be pulled away from the top and
bottom of the chart toward the middle of Price bars are pulled
Vertical Compression
the window. down from top
of chart.
After drawing the trendline, be sure to

return the price bars to their original
position so the chart view is always
consistent. Press the plus (+) key on
the numerical keypad, or Shift + Plus
sign on the letter keyboard, until the
bars no longer push higher on the chart. Telechart
“The starting point of all achievement is desire. Keep this

constantly in mind. Weak desires bring weak results, just as
a small amount of fire makes a small amount of heat.”
~Napoleon Hill, Author

Think and Grow Rich

SUPPORT AND RESISTANCE

Trendlines can be drawn to identify support and resistance levels. A stock may test a
support or resistance level several times. The more times the trendline is tested, the
stronger the line and the more significant the event if it is broken.
Top Trendline = Resistance Bottom Trendline = Support

Price often finds resistance at or near a Price often finds support at or near a
ceiling. When price breaks up through floor. When price breaks down through
resistance, it is referred to as a support, it is referred to as a breakdown.
breakout.
Breakout
Resistance
Support
Break Down
Support and Resistance lines can go back weeks, months and even years in some
cases. To draw very long-term trendlines I suggest using a weekly or monthly chart.
Channel Lines:
Regardless of the trend direction, stocks often swing up and down between a support
and a resistance line. Parallel trendlines can be drawn on each side to trap the price
action. These trendlines are often referred to as channel lines.
Horizontal Channel Lines Declining Channel Lines

DETERMINING TREND DIRECTION

When considering which trendline(s) to draw, first look at the chart to see the direction
price has been moving for the past several weeks (the intermediate-term). Stocks can
only move one of three directions:
• Up
• Down
• Sideways (no trend)
STOCK IN AN UPTREND - DRAW RISING TRENDLINE(S):
In an uptrend, price forms rising peaks

and rising bottoms. The 10-period moving
average will be above the 20-period
moving average during most of the
uptrend. To begin an up trendline, price
must form at least two rising bottoms.
If a stock is in an uptrend, the primary

trendline should be a support line. The
support line is an angled line referred to
as a rising, ascending or up trendline. It
should be drawn as follows:
Telechart
Uptrend: Rising Support Line
• angled up and to the right.
• connecting rising three-bar bottoms
(pivots).
• leaving the price action trapped above
the trendline.
Once the primary trendline has been

established, determine if a secondary
trendline can be drawn across rising
peaks. Sometimes there is no clear
secondary line; however, the price may be
rising between two parallel channel lines
or in an ascending wedge. Telechart
Rising Channel Lines

Monitor the trendline:
A rising trendline is not static. If price continues higher, the line can usually be raised a
little bit each day. And every time a new, higher bottom forms, determine if the trendline
needs to be adjusted. A new higher pivot may cause the trendline angle to change.
(Angle is discussed later in this e-book.) The more times the trendline touches new
pivot points, the stronger the line becomes.
Price may pierce the rising support trendline leaving a shadow below the line; however,
a close below the primary trendline alerts of a possible change in trend.
STOCK IN A DOWNTREND - DRAW DECLINING TRENDLINE(S):
In a downtrend, price forms declining

peaks and declining bottoms. The 10-
period moving average will be below the
20-period moving average during most of
the downtrend. To begin a down
trendline, price must form at least two
declining peaks.
If a stock is in a downtrend, the primary

trendline should be a resistance line. The
resistance line is an angled line referred to
as a declining, descending or down
Telechart
trendline. It should be drawn as follows: Downtrend: Declining Resistance Line
• angled down and to the right.

• connecting declining three-bar peaks
(pivots).
• leaving the price action trapped below
the trendline.
Once the primary trendline has been

established, determine if a secondary
trendline can be drawn across declining
bottoms. Sometimes there is no clear
secondary line; however, the price may be
declining between two parallel channel
lines or in a descending wedge. Telechart
Descending Wedge

Monitor the trendline:
A declining trendline is not static. If price continues lower, the line can usually be
lowered a little bit each day. Every time a new, lower peak forms, determine if the
trendline needs to be adjusted. A new lower pivot may cause the trendline angle to
change. The more times the trendline touches new pivot points, the stronger the line
becomes.
Price may pierce the declining resistance trendline leaving a shadow above the line;
however, a close above the primary trendline alerts of a possible change in trend.
STOCK MOVING SIDEWAYS – DRAW TWO TRENDLINES:
A stock may move sideways (consolidate) for

weeks or months. During this time, there is no
clear trend direction indicated by the peaks and
bottoms. Usually the 10- and 20-period moving
averages will intertwine or whipsaw.
It is usually more difficult to trade in this type of

non-trending environment than in an up or down
trend. If price is making clean swings within the
consolidation boundaries, you may be able to
trade them; however, if price moves are erratic, it
may be more difficult. A popular strategy is to Telechart
trade the breakout or break down from these A Trendless Phase

periods of consolidation.
When price is moving sideways, you may be able to trap the price movement in one of
the following ways:
• Inside Horizontal Trendlines = Trading Range

• Inside Angled Trendlines = Triangle or Broadening Pattern
Parallel Horizontal Trendlines:
If price is moving sideways, making prominent peaks near the same price level on the
upside and forming prominent bottoms near the same price level on the downside, the
stock is in a trading range.
A trading range may also be referred to as a horizontal channel or a rectangle. The

price action can be trapped between two parallel horizontal trendlines. These lines
indicate support and resistance for the trading range. Eventually price moves outside of
the consolidation, either breaking out or breaking down.

When price is consolidating in a trading range, draw two trendlines:
• Top Trendline - A horizontal line is drawn across prominent peaks (pivots). This
resistance line is the upper boundary, or ceiling, of the trading range.
• Bottom Trendline – A horizontal line is drawn across prominent bottoms (pivots).

This support line is the lower boundary, or floor, of the trading range.
Usually the peaks and bottoms in a trading

range will be inconsistent. Define the floor
and ceiling as accurately as possible by
drawing the strongest trendlines (the ones
with most pivots touching the lines). This
may mean drawing through some
shadows, bodies and pivots.
Because the price moves during

consolidation periods are often erratic,
there may be more than one boundary for
a trading range. You may need to draw A Trading Range
Telechart
more than one horizontal line on either

side.
Angled Trendlines:
If price is moving sideways and is making uneven swings, you may be able to trap the
consolidation between two converging or diverging trendlines.
Converging Lines - A triangle forms when price moves sideways for several weeks with
each swing becoming shallower. In a triangle, price “coils” and tightens as it moves
toward an apex. There are three types of triangles:
• Ascending Triangle – A bullish pattern with a flat top and a rising bottom trendline.
Regardless of whether this pattern forms in an up or down trend, it has a bullish
bias. However, traders often “fade” the failed pattern (go Short if it breaks down
instead of breaking out).
• Descending Triangle – A bearish pattern with a flat bottom and a declining top
trendline. Regardless of whether this pattern forms in an up or down trend, it has a
bearish bias. However, traders often fade the failed pattern.
• Symmetrical Triangle – A neutral pattern with two converging trendlines (the top line
slopes down and the bottom line slopes up). The bias is for the stock to resume the
prior trend direction that was under way before the triangle formed. However, it can
be traded Long if it breaks to the upside or Short if it breaks to the downside.

Diverging Lines – Price may move sideways for a period of time making wider swings
each time. In these cases, the trendlines will be diverging instead of converging (the
top line slopes up and the bottom line slopes down).
• Broadening Pattern - A lesser known member of the triangle family is the broadening
pattern. Price moves sideways but swings outward from an apex instead of coiling
into the apex. This pattern is fairly rare.
Examples – The four types of triangles:
Telechart Telechart
Ascending Triangle Descending Triangle
Telechart Telechart
Symmetrical Triangle Broadening Pattern
“We are what we repeatedly do.

Excellence, then, is not a single act but a habit.”
~Aristotle, Philosopher and Scientist

SLOPE OF ANGLED TRENDLINE

Traders should pay attention to the degree of slope, or angle, of a trendline.
Ideal Angle:
An angle of approximately 30-45 degrees is

ideal; it is an angle that indicates a healthy
trend. A trendline at this angle can be
maintained for weeks or months. It is
common to see this type of slope on a
stock, or groups of stocks, in an
intermediate-term uptrend.
Too Steep:
When a very steep trendline can be drawn,

the stock is making a parabolic move. Telechart
Price is rising too quickly. Stocks cannot Approximately 45 degree angle
maintain a steep trendline for a long period
of time. Inevitably profit taking will ensue
resulting in a break of the trendline. Once a
steep trendline has been broken, wait for a
new bottom to form to draw a new trendline.
Skilled traders can capitalize on these

strong moves if they are careful to watch for
warnings of the end of the move. A close
below the rising trendline should not be
ignored on these steep moves; and by then
you may find yourself scrambling to get out
Telechart
with your profits. Too Steep – Parabolic Move
Too Gradual:
A trendline that has a fairly flat slope may

be an indication of a weak trend. Even
though a flatter trendline is generally a
strong one, you may find it is difficult to
make much money if the rising trendline
angle is too shallow. In this example, it took
several months for the stock to rise 10%. If
this is a long-term position, an investor may
not mind staying with a slow moving stock.
However, active traders typically look for a Telechart
more vigorous ascent. Too Gradual

When a stock is in an uptrend, there are often two or more support trendlines of varying
slope that can be drawn. Vice versa in a downtrend. If you are watching for a break of
the trendline as a warning that the trend may be changing, which of the lines should you
focus on? That may depend on the magnitude of the trend under way and also your
style of trading.
Recall from Dow Theory the following three durations of trends:
• Primary Trend – A long-term trend that lasts from several months to a year or more.
• Secondary Trend – An intermediate-term trend that lasts from several weeks to a

few months.
• Minor Trend – A short-term trend that lasts from a few days to a few weeks.
Short- and Intermediate-Term Trendlines:
When a stock remains in an uptrend for several months, it is common for several short-
term rising trendlines to be broken during times when the bigger trend experiences deep
pullbacks or corrections. If you are drawing tight lines on the daily chart, like the short-
term trendlines shown in the example of the iShares S&P Index Fund (IVV) below, you
should anticipate that they will be broken fairly frequently.
Often a stronger
trendline lies below the
short-term lines that is
representative of the Short-Term Trendlines
intermediate-term trend.
That stronger line being

broken is a more
significant event than the
many tighter lines that
represent only two or
three weeks of price Intermediate-Term
Trendline
action.
Telechart
Long-Term Trendlines:
I focus on the few months closest to the right edge of a daily chart to find tradable set-
ups and do much of my analysis. However, it is also important to look beyond the most
recent few months to see the longer-term trend. Be aware of major ceilings and floors
in the past. They often stop a stock’s move in its tracks, at least temporarily. A break of
these major support and resistance levels is a significant event.

For very long-term trends (i.e. a year or more), consider drawing trendlines on the
weekly chart. When a strong trendline on a weekly chart is broken that is a very
significant event. From 2004-2006 many cement stocks were in a bull market due to
demand for the product and limited supply. In a strong uptrend like that, a core position
can be held, sometimes for weeks at a time, and swing trades can be taken around the
core position. This is a method that I refer to as Lock and Reload. It is outlined in my
advanced strategies course.
On the chart below of Cemex (CX), several short- and intermediate-term trendlines
were broken on the daily chart over a period of about a year and a half. However, the
long-term trendline on the weekly chart remained intact for most of that period. When
the weekly trendline was finally broken in May 2006, the stock declined for several
weeks.
Cemex (CX)
Daily Chart
Several intermediate-
term trendlines were
broken.
Telechart
Cemex (CX)
Weekly Chart
A long -term trendline

remained intact for
about a year.
Telechart

Changes in Trendline Slope:
Trendlines are not static, they should be monitored. There will be many times when
new price action forces you to adjust a trendline or draw a new trendline.
A change in trendline slope that

should get your attention is when
the angle makes a fairly sharp
upward shift. In other words, a
steady uptrend makes a sharp
advance. Often a correction
follows the sharp advance as
traders try to exit the stock with
what is left of their profits.
In this example, the angle of the

rising trendline on American
Greetings (AM) became steeper Telechart
providing early warning to be alert Change of Trendline Slope
for a sell off.
When I have a Long position in a stock and the trendline slope shifts notably higher, I
typically decrease my position size (i.e. sell a third to half of the shares) to reduce
exposure to a sharp decline. I may also shift to managing the remainder of the position
on the hourly time frame. On that lower time frame, you will typically see an earlier
warning if the stock begins to break down than by just monitoring the daily chart.
Detailed discussion for using the hourly time frame is included in my advanced
strategies course.
“Things may come to those who wait,

but only the things left by those who hustle.”
~Abraham Lincoln

MORE TRENDLINE TIPS
Incorporate trendline drawing as a part of your routine. I advise maintaining a rising

trendline below all of your Long positions on the main time frame that you are trading
(i.e. daily). Vice versa for Short positions. This provides a visual indication when the
stock may be changing direction.
I also maintain trendlines on the following market averages. Their symbols in Telechart
are indicated in parenthesis:
• Dow Jones Industrial Average (DJ-30)

• S&P 500 (SP-500)
• Nasdaq Composite Index (COMPQX)
• S&P 400 Midcap Index (MID--X)
• Russell 200 Small Cap Index (RUT-X)
I usually have trendlines drawn on many other index charts that I review regularly. For
example, on sector indexes such as the Semiconductor Index (SOX--X) and the
Housing Index (HGX--X).
DEVELOP YOUR TRENDLINE DRAWING SKILLS:
Traders who have little or no experience drawing trendlines may struggle a bit at first.
Below are some tips that may be helpful in the early stages. Eventually, drawing
accurate trendlines should become easy.
Two Step Approach: Try first drawing a trendline touching the most extreme points
(the most prominent peaks or bottoms). Don’t clip off even a shadow. Then look at that
line and evaluate it. Is it the strongest line that can be drawn, or could it be adjusted to
touch more pivot points and leave fewer voids on the chart (areas of white space
between the touches)? Tighten the line to the best fit, even if it means clipping one or
more shadows, bars, or even a pivot in some cases.
1
2

Your charting software may offer a quick way to adjust a

line without having to erase and redraw it. For example,
in Telechart there is a circle at each end of a trendline.
You can click the circle and drag and drop the line to the
new location.
Draw Parallel Lines:
Whether a stock is in an uptrend, a

downtrend, or moving sideways, it is often
doing so in a channel.
Price tends to traverse back and forth as

short-term traders exploit the swing moves
and take profits at near-term support or
resistance levels.
Draw the most obvious strong line and then

create a parallel line. This allows you to see
the key support and resistance levels as well
as determine the trend direction.
Start at the right edge of the chart:
Most technical analysis books that include discussion of trendlines suggest drawing the
line from left to right. That is also the method that I prefer; it feels awkward to me to
draw trendlines from right to left. However, if you are struggling with drawing trendlines,
you can try starting from the right edge of the chart and drawing from right to left.
Drawing from right to left:
• Start at right edge of chart.

• Locate the first prominent peak
(circled) nearest the right edge.
Start the trendline at that peak.
• Pull the trendline to the left touching
all peaks at or near the line.
Follow the same steps for a trendline

that touches bottoms.

Chart Template for Drawing Trendlines:
You may find it difficult to draw trendlines when there are a lot of indicators in the chart
window. The plot lines of moving averages, Bollinger Bands or a linear regression often
make the chart look very “busy.” They lay over the peaks and bottoms making it difficult
to draw an accurate line. For this reason, one of my twelve chart templates in Telechart
is set aside for drawing trendlines.
I use the #12 template for this purpose because it is easy for me to remember that it is
the last one of the “F” (function) keys at the top of the keyboard. This template is
completely clear of any indicators so there is an unobstructed view of the price action.
Telechart Telechart
Busy Chart - Peaks and Bottoms Obstructed Unobstructed View
IN CONCLUSION
I sincerely hope that this e-book has answered all the questions you have about
drawing classic trendlines, as well as emphasizing their role and importance as a
charting tool. In order to become proficient with this tool, you must put it to work. With
practice, your trendline skills will steadily improve and you’re ability to analyze a chart
will be greatly enhanced.
Trendlines are just one facet of becoming a skilled chartist. As of this writing, I am in
the final stages of development of a very comprehensive and detailed course that
encompasses the other areas of chart analysis. If you are interested in further
instruction on charting or other trading-related topics or strategies, please e-mail me
directly at tina@tradersroadmap.com or visit my website at www.tradersroadmap.com.
I wish you the best of luck with your trading.
Sincerely,
Tina Logan
Trader’s Roadmap


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TINA LOGAN’S GUIDE TO USING TRENDLINES - 1

Property of Tina Logan – Trader’s Roadmap www.tradersroadmap.com (Rev. Nov 2006)

GUIDE TO USING TRENDLINES

1. Support and resistance levels.

3. If a chart pattern is present.

Property of Tina Logan – Trader’s Roadmap www.tradersroadmap.com (Rev. Nov 2006)

Broadcomm Corp (BRCM)

Property of Tina Logan – Trader’s Roadmap www.tradersroadmap.com (Rev. Nov 2006)

TRENDLINE DRAWING TOOLS

1. Press the letter “D” on the keyboard (think of “D” for

2. Click in the chart window at the beginning point for

3. Drag the trendline to the desired ending point.

4. Release the mouse.

Once you release the mouse, the crosshair will

If there are several trendlines on a chart and you only

1. Point the mouse at either end of the trendline to be

2. Right click the circle.

Property of Tina Logan – Trader’s Roadmap www.tradersroadmap.com (Rev. Nov 2006)

There is a small circle in the middle of the trendline.

Adjust Length or Angle of Trendline:

If a trendline is drawn too close to the right edge of the

Create a Parallel Line:

To define a channel using parallel lines: First Line

1. Draw the first trendline.

Property of Tina Logan – Trader’s Roadmap www.tradersroadmap.com (Rev. Nov 2006)

Your charting program may add an

From the Telechart main menu:

Property of Tina Logan – Trader’s Roadmap www.tradersroadmap.com (Rev. Nov 2006)

ADDITIONAL DRAWING TOOLS:

Once the line is dropped on the chart, as long as

• Providing a visual indication of a protective

Property of Tina Logan – Trader’s Roadmap www.tradersroadmap.com (Rev. Nov 2006)

DRAWING CLASSIC TRENDLINES

A Pivot Not a Pivot Not a Pivot

A Pivot Not a Pivot Not a Pivot

Property of Tina Logan – Trader’s Roadmap www.tradersroadmap.com (Rev. Nov 2006)

Invalid Trendline Valid Trendline

To count as a touch on the Pivot

Property of Tina Logan – Trader’s Roadmap www.tradersroadmap.com (Rev. Nov 2006)

A Pivot Near the Line is a Touch:

Focus on Strong Trendlines:

Property of Tina Logan – Trader’s Roadmap www.tradersroadmap.com (Rev. Nov 2006)

Recall that trendlines identify the following:

1. Support and resistance levels.

Prominent Pivots Less Prominent Pivots

Property of Tina Logan – Trader’s Roadmap www.tradersroadmap.com (Rev. Nov 2006)

Trendline extended to the right edge:

The bar at the right edge of the chart cannot be

It is okay to extend the trendline to the right

Price pierced the trendline Price closed below the trendline.

Property of Tina Logan – Trader’s Roadmap www.tradersroadmap.com (Rev. Nov 2006)

CANDLESTICK PATTERNS AT TURNING POINTS:

It is fairly common to see

Property of Tina Logan – Trader’s Roadmap www.tradersroadmap.com (Rev. Nov 2006)

DRAWING TRENDLINES THROUGH PRICE BARS:

Drawing a Trendline through a Shadow:

If it is necessary to draw a trendline through a Trendline drawn through a shadow.

Drawing a Trendline through the Body of a Bar:

Property of Tina Logan – Trader’s Roadmap www.tradersroadmap.com (Rev. Nov 2006)

Drawing a Trendline through a Pivot:

Drawing a trendline through a

Drawing Trendlines to Identify a Trading Range:

If price is in a messy trading