Breaking
through support or resistance levels results in a
change of traders’ expectations (which causes
supply/demand lines to shift).
This type of a
change is often abrupt and «news based».
Such changes may have a certain trend. A trend represents
a consistent change in prices. Trends differ from
support/resistance levels in that trends represent
change, whereas support/resistance levels represent
barriers to change.
An Uptrend is defined by successively higher low-prices.
A rising trend can be thought of as a rising support
level: the bulls are in control and are pushing prices
higher. A Downtrend is defined by successively lower
high-prices. A falling trend can be thought of as
a falling resistance level: the bears are in control
and are pushing prices lower.
Just as prices
penetrate support
and resistance levels when expectations change,
prices can penetrate rising and falling trend lines.
Volume increases when the trend line has been penetrated.
As with support and resistance levels, it is common
to have traders’
remorse following the penetration of a trend line.
Again, trading volume is the key to determining the
significance of the penetration of a trend.
