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Point and Figure Charts

Parallel Trend Lines

Earlier we have learned to draw a single trendline on point & figure charts but now we will learn to draw parallel trend lines or commonly known as Channels.

 

Channels are important. Prices tend to move up and down within channels, and so lines parallel to the trend, but on the opposite side of the price action becomes important channels for understanding the strength of the trend. In an uptrend, these lines offer resistance to the price and in a downtrend they offer support. If the price fails to reach the upper channel in an uptrend, this is a sign of weakness as the bears bring the price down before it reaches the upper line of the channel. Conversely, if they fail to reach the lower channel in a downtrend it is a sign of strength.

 

In Point and Figure analysis, the parallel line to the uptrend bullish support line is called the bullish resistance line. The parallel to the downtrend bearish resistance line is called the bearish support line.

 

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Units 18/28