Equity Market Pundit

Hi ALL

The day has been good so far, Indian markets as well as the European markets have shown strength. Probably Nifty will touch new highs.... as we have seen a bounce back from around 4020-4040 levels.

Now let us continue with our discussion on Technical Analysis. Today let us look at the basic of it the Trendline.

A trend line is a straight line that connects two or more price points and then extends into the future to act as a line of support or resistance. Market normally follows a trend which is depicted by the trendline.

For the up market we draw a trend line by joining succesive lows. and for the down market by joining the highs. The break in the trend line would indicate change in the market trend or direction.

One thing that I have noted recently is that if you exterpolate two or more trendlines so that they join at one single point, that point will correspond to the time where the market will peak or dip.

High points and low points appear to line up better for trend lines when prices are displayed using a semi-log scale. This is especially true when long-term trend lines are being drawn or when there is a large change in price.