Trendline Crosses: When Do They Matter?

If you were not convinced from last week’s post Triangles Don’t End at the Apex, of the power of trendlines to influence price well into the future, there was another interesting phenomenon about trendlines that occurred today.  Many people know that a price hitting a trendline or trendlines crossing as a price reaches them can be a significant event.  But is that it?  Below is a 5 minute chart of the SPY that I posted a couple of times today.

I have noted today that the solid downtrend line that has been resistance for any up moves, gains more significance every time it is touched by price and rejected. But late today it gained another piece of credibility. Note the horizontal dotted trendline marked 120.89. This line has been extended from the April 26, 2010 high. Notice where and when the two trendlines crossed. It was about 3:00 today when the last leg of the downward move began and it happened well above where the stock price was at the time. This is the key take away. Crossing trendlines matter not only when they push a price touching them, but even when they are not near the price. This is yet another reason to keep old trendlines and extend them forward, especially when they become significant.   This type of movement will not happen every time, but knowing that it can, helps you be prepared.

Trade’m well!

(As always you can see these individual charts and more on my twitter feed and on chartly.)

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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