Trend line analysis in stock market - techanical analysis

Trend line analysis in the stock market - technical analysis

1. Trent line appears to work as a support and  resistance of stock price
2. The trend line indicates the direction of the stock trend
3. To remove the excessive noise of stock movement Trend line is used to identify the trend in the stock 
4. A trend line is used to find the breakout direction after consolidation

Why trend line work in the stock market?

1. To understand how trend linework lets take an example. 
2. Suppose there are three traders in the market 
3. Trader one buys the stock and stock price falls but he is holding his position with loss
4. Trader two buys the stock and stock price falls but he panics and sells his holding and book loss
5. Trader three short sell the stocks and stock price falls he is in profit and enjoying his profit
6. Trader one is hoping the market will recover 
7. Trader two reached the position where he is not able to take more loss and exit
8. Trader three is happy with his trader and hoping to make more money
9. Therefore in a rising market, stock price support level increases and falling in the market stock the level decreases
10. If we average out all those trade the pain and gain of all those traders can be drawn with trend line 

Volume near trend line - Support and resistance

1. If the price spread large and volume is increased gives breakout to the upper trend line and on the next day the price close higher you can expect the higher price in the future.
2. If the Down bar is small and volume is low after breakout it confirms the trend is very strong because the selling pressure is very small.
3. However, after the breakout up bar has low volume and narrow spread it is the sign of weakness
4. If it is a down day with low volume price approaching the lower trend line price is likely to hold the trend line support and market is likely to go up the next day
5. If on a down day with high volume break the lower trend line support it shows the supply of stocks and change of trend if stock trade below the closing price next day it confirms the trend 
6. Identify the trading range and channel
7. The trading channel can be up or down
8. The trading channel shows the future trading range
9. It is difficult to change the trend of the stock
10. If the market is trading up it forms higher highs 
11. If price spread is wide and volume is high it is likely to break the trading channel
12. If price spread is small and volume is high it is likely to revert to the channel range
13. To break the resistance of trend line gapping up is another method 
14. Before gapping up stock there should be consolidation

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