Speed lines can be redrawn in the event that a market makes a new, higher high or lower low. The 1/3 line would be drawn to represent a one-third upward retracement of the downtrend, and the 2/3 line to represent a two-thirds retracement of the downtrend. $50 – $26 = $24.)īoth the 1/3 and 2/3 lines are essentially trendlines that indicate possible support levels in the event of a downside corrective retracement during an overall uptrend.Īpplying speed lines to a downtrend, the first line is drawn from the recent high price the downtrend began from to the most recent low of the downtrend. The 2/3 line would be drawn from the $10 low to the $24 level. (The total advance of the stock is $50 – $10 = $40. The 1/3 line would be drawn from the $10 low to the $37 level. The first line would be drawn from the $10 low price level to the $50 high. The third line, the 2/3 line, is drawn from the low to the price level that represents a two-thirds retracement from the high.įor example, if a stock advanced over a period of time from $10 a share to a high of $50 a share, then speed lines would be drawn as follows: The second line, which is known as the 1/3 line, is then drawn from the low price to the price point that represents a one-third retracement from the high toward the low. The first line in an uptrend is drawn from the low price point, or start, of the uptrend to the most recent high price reached in the trend. How to Draw Speed LinesĪlthough you can simply apply a speed lines indicator to a chart, speed lines are also easy to draw yourself. Each of the three lines that comprise this indicator shows possible support (in an uptrend) or resistance (in a downtrend) levels that may serve as future turning points for a security’s price. Speed lines are what is known as a fan tool – one that reveals multiple potential support or resistance trend line levels – similar to the Fibonacci fan or Gann fan. They are sometimes referred to as “speed resistance lines,” however, that moniker is somewhat misleading since the lines are designed to represent both support and resistance levels. The technical analysis tool of speed lines was developed by Edson Gould, a technical analyst who became quite well-known for making several accurate stock market calls during the 1960s and 1970s.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |