1. The upwards sloping trend line was broken, and we got a
signal that the market might have turned bearish.
2. On the other hand, if we relied solely on the formation of a
valid pivot high to indicate a change in market bias, we would
have detected a change in bias later.
Trend lines also make up for a shortcoming of using valid pivots
to judge the market bias. Trends can reverse without forming
any valid pivots in the opposing direction. For instance, a bull
trend can turn bearish without forming a valid high. In such
cases, the break of a bull trend line will alert us to the trend
change.
Other than indicating reversals, trend lines also act as support
and resistance. Some of the best trades are bounces off trend
lines. On top of that, the slope of a trend line tells us the example of how a trend line gave an earlier
signal of a change in market bias.
July 11, 2022 3.2K 3
