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Trend Lines
A trend represents a
consistent change in prices.
Up Trend Line
An up trend line has a positive slope and is formed by connecting two of more
low points. The second low must be higher than the first for the line to have a
positive slope. Up trend lines act as support and indicate that demand is
increasing even as the price rises. A rising price combined with increasing
demand is very bullish and shows a strong determination on the part of the
buyers. As long as prices remain above the trend line, the up trend is
considered solid and intact. A break below the up trend line indicates that
demand has weakened and a change in trend could occur.
Down Trend Line
A down trend line has a negative slope and is formed by connecting two or more
high points. The second high must be lower than the first for the line to have a
negative slope. Down trend lines act as resistance and indicate that supply is
increasing even as the price declines. A declining price combined with
increasing supply is very bearish and shows the strong resolve of the sellers.
As long as prices remain below the down trend line, the downtrend is considered
solid and intact. A break above the down trend line indicates that net-supply is
decreasing and a change of trend could occur.
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