{"id":5100,"date":"2017-08-16T14:59:21","date_gmt":"2017-08-16T18:59:21","guid":{"rendered":"http:\/\/www.morpheustrading.com\/blog\/?p=5100"},"modified":"2022-04-06T15:04:59","modified_gmt":"2022-04-06T19:04:59","slug":"limiting-trendlines","status":"publish","type":"post","link":"https:\/\/morpheustrading.com\/blog\/limiting-trendlines\/","title":{"rendered":"Limiting Trendlines: How To Predict Key Resistance Levels In Stocks"},"content":{"rendered":"<div class=\"moz-text-html\" lang=\"x-western\">\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">TABLE OF CONTENTS<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/morpheustrading.com\/blog\/limiting-trendlines\/#One_of_the_first_things_you_probably_learned_while_studying_technical_analysis_is_how_to_draw_a_simple_trendline\" >One of the first things you probably learned while studying technical analysis is how to draw a simple trendline.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/morpheustrading.com\/blog\/limiting-trendlines\/#Whats_So_Limiting_About_Limiting_Trendlines\" >What&#8217;s So Limiting About Limiting Trendlines?\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/morpheustrading.com\/blog\/limiting-trendlines\/#Limiting_Trendlines_Nailing_Resistance_Levels_In_4_Hot_Stocks\" >Limiting Trendlines: Nailing Resistance Levels In 4 Hot Stocks<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/morpheustrading.com\/blog\/limiting-trendlines\/#Facebook_FB\" >Facebook ($FB)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/morpheustrading.com\/blog\/limiting-trendlines\/#Ollies_Bargain_Outlet_OLLI\" >Ollie&#8217;s Bargain Outlet ($OLLI)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/morpheustrading.com\/blog\/limiting-trendlines\/#Alarmcom_ALRM\" >Alarm.com ($ALRM)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/morpheustrading.com\/blog\/limiting-trendlines\/#iShares_Russell_2000_ETF_IWM\" >iShares Russell 2000 ETF ($IWM)<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"One_of_the_first_things_you_probably_learned_while_studying_technical_analysis_is_how_to_draw_a_simple_trendline\"><\/span><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-5109\" src=\"https:\/\/www.morpheustrading.com\/blog\/wp-content\/uploads\/2017\/08\/trendline-forecast.jpg\" alt=\"limiting trendline prediction\" width=\"526\" height=\"325\" title=\"\" srcset=\"https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2017\/08\/trendline-forecast-110x68.jpg 110w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2017\/08\/trendline-forecast-300x185.jpg 300w\" sizes=\"auto, (max-width: 526px) 100vw, 526px\" \/>One of the first things you probably learned while studying technical analysis is how to draw a simple trendline.<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Most books focus on drawing trendlines by connecting a series of &#8220;higher lows&#8221; to show support (in an uptrend), or connecting a series of &#8220;lower highs&#8221; to show resistance (in a downtrend).<\/p>\n<p>This is basic\u00a0<a href=\"https:\/\/youtu.be\/CUoOWveKPAE\" target=\"_blank\" rel=\"noopener\">technical analysis 101<\/a>.<\/p>\n<p>But what&#8217;s lesser known is that you can also draw trendlines on the weekly and monthly charts in a way that forecasts\u00a0<em>resistance<\/em>\u00a0in uptrending stocks or indexes.<\/p>\n<p>Even in steadily uptrending stocks trading at fresh all-time highs, &#8220;limiting trendlines&#8221; can accurately predict when rallies are likely to stop &#8212; or at least lose their momentum.<\/p>\n<p><em>Continue reading<\/em> to discover how limiting trendlines can improve your trading efficiency by maximizing your profits in uptrending stocks and ETFs.<\/p>\n<\/div>\n<h2><span class=\"ez-toc-section\" id=\"Whats_So_Limiting_About_Limiting_Trendlines\"><\/span><strong>What&#8217;s So Limiting About Limiting Trendlines?\u00a0<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignleft size-full wp-image-5106\" src=\"https:\/\/www.morpheustrading.com\/blog\/wp-content\/uploads\/2017\/08\/limiting-trendlines.png\" alt=\"speed limit trendlines\" width=\"195\" height=\"258\" title=\"\"><\/p>\n<p>A limiting trendline can be drawn by connecting the major &#8220;swing highs&#8221; (peaks) that appear on the chart of a stock&#8217;s long-term uptrend.<\/p>\n<p>We refer to these lines as &#8220;limiting trendlines&#8221; because their presence can swiftly put the brakes on a rally &#8212; even with stocks at all-time highs that are otherwise lacking resistance.<\/p>\n<div class=\"moz-text-html\" lang=\"x-western\">\n<p>This simple concept works best on weekly and monthly chart time frames, preferably using a linear (non-logarithmic) chart.<\/p>\n<p>Determining how to precisely draw these trendlines is not cut and dry; rather, it&#8217;s a bit of an art form.<\/p>\n<p>So, we try to keep it honest and filter out the &#8220;noise&#8221; by simply using logical swing highs as the connecting points on a chart.<\/p>\n<p>Got it? If not, don&#8217;t worry!<\/p>\n<p>Just check out the four annotated charts below and it will make perfect sense!<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Limiting_Trendlines_Nailing_Resistance_Levels_In_4_Hot_Stocks\"><\/span><strong>Limiting Trendlines: Nailing Resistance Levels In 4 Hot Stocks<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<\/div>\n<div class=\"moz-text-html\" lang=\"x-western\">\n<h3><span class=\"ez-toc-section\" id=\"Facebook_FB\"><\/span><strong>Facebook ($FB)<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<div class=\"moz-text-html\" lang=\"x-western\">\n<div class=\"moz-text-html\" lang=\"x-western\">\n<p>Facebook is a pretty good example of a stock that had a limiting trendline that connected the highs during the summer of 2014.<\/p>\n<p>It wasn&#8217;t until late 2015 that $FB cleared the top trend line and was able to improve the angle of its attack in 2016 and 2017.<\/p>\n<\/div>\n<div lang=\"x-western\">Once a stock clears the trendline, the prior resistance line, that same line typically becomes support on the next pullback.<\/div>\n<div lang=\"x-western\"><\/div>\n<div lang=\"x-western\">That&#8217;s what happened with $FB in early 2016.<\/div>\n<div class=\"moz-text-html\" lang=\"x-western\">\n<div><\/div>\n<div>$FB&#8217;s strong 2017 rally stalled at its limiting trendline in May, and continues to find resistance at the same line.<\/div>\n<div><\/div>\n<div>The touch of the line itself may not be a full sell signal, but can function as a warning that there may be several weeks of chop ahead:<\/div>\n<\/div>\n<p><img decoding=\"async\" src=\"https:\/\/www.morpheustrading.com\/\/%7Erick\/\/charts\/2016\/170705FB3.png\" alt=\"$FB WEEKLY daily\" title=\"\"><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Ollies_Bargain_Outlet_OLLI\"><\/span><strong>Ollie&#8217;s Bargain Outlet ($OLLI)<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<\/div>\n<div>\n<p>Looking at the weekly chart of $OLLI below, notice the stock recently cleared two limiting trendlines, which are now acting as support.<\/p>\n<p>A move through the highs of the current range and $OLLI is free of all price and trendline resistance, which means it has the potential to increase its angle of attack:<\/p>\n<p><img decoding=\"async\" src=\"https:\/\/www.morpheustrading.com\/\/%7Erick\/\/charts\/2016\/170705OLLI3.png\" alt=\"$OLLI weekly\" title=\"\"><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Alarmcom_ALRM\"><\/span><strong>Alarm.com ($ALRM)<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>$ALRM is a current long position in\u00a0<strong><a href=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"noopener\"><em>The Wagner Daily<\/em><\/a><\/strong> that recently stalled near the upper channel of its limiting trendline.<\/p>\n<p>Since the touch of the trendline arrived only four weeks after a fresh breakout to new highs, we initially did not sell any of our position.<\/p>\n<p>However, the trendline gave us a heads-up and we sold $ALRM for a 12.8% gain on July 28:<\/p>\n<p><img decoding=\"async\" src=\"https:\/\/www.morpheustrading.com\/\/%7Erick\/\/charts\/2016\/170705ALRM3.png\" alt=\"$ALRM weekly\" title=\"\"><\/p>\n<h3 class=\"moz-text-html\" lang=\"x-western\"><span class=\"ez-toc-section\" id=\"iShares_Russell_2000_ETF_IWM\"><\/span><strong>iShares Russell 2000 ETF ($IWM)<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The last chart is the weekly of Russell 2000 ETF ($IWM), which has stalled at the limiting trendline on every rally attempt so far in 2017.<\/p>\n<p>A move through the highs of the current range would put the Russell above the trendline and potentially into strong rally mode.<\/p>\n<p><img decoding=\"async\" src=\"https:\/\/www.morpheustrading.com\/\/%7Erick\/\/charts\/2016\/170705IWM3.png\" alt=\"$IWM weekly\" title=\"\"><\/p>\n<p>The charts above are a few well-groomed examples, but these trendlines do work and have considerable value.<\/p>\n<p>The next time you are examining a chart that is breaking out to new <span class=\"__postbox-detected-content __postbox-detected-date\">52-week<\/span> highs, take a look at the weekly or monthly time frames to locate potential limiting trendlines.<\/p>\n<p>It may just prevent you from entering a trade that has limited upside and allow money to be put to work elsewhere while waiting for the stock to clear the top trend line.<\/p>\n<p>By the way, it&#8217;s fine if you do not exactly agree with the way these trendlines at the highs are drawn &#8212; just figure out a method that works for you and stick with it.<\/p>\n<p>If you enjoyed this mini trading lesson, <a href=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"noopener\"><strong>sign up now<\/strong><\/a> to receive our nightly stock picking newsletter and learn a &#8220;no nonsense&#8221; trading strategy that simply works.<\/p>\n<p>By the way, your <a href=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"noopener\"><em>Wagner Daily<\/em><\/a> subscription now includes simple Option picks too &#8212; all for just $49 per month or $299 per year (save 50%).<\/p>\n<p><em>What do you think about &#8220;limiting trendlines?&#8221; Drop us a comment below with your feedback or questions.<\/em><\/p>\n<p><center><script src=\"\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js\" async=\"\" type=\"text\/javascript\"><\/script><!-- Footer of content --> <ins class=\"adsbygoogle\" style=\"display: inline-block; width: 300px; height: 250px;\" data-ad-client=\"ca-pub-7565144363001883\" data-ad-slot=\"7002222565\"><\/ins><script type=\"text\/javascript\">\/\/ <![CDATA[ (adsbygoogle = window.adsbygoogle || []).push({}); \/\/ ]]><\/script><\/center><\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>One of the first things you probably learned while studying technical analysis is how to draw a simple trendline. Most books focus on drawing trendlines by connecting a series of &#8220;higher lows&#8221; to show support (in an uptrend), or connecting a series of &#8220;lower highs&#8221; to show resistance (in a downtrend). This is basic\u00a0technical analysis [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_links_to":"","_links_to_target":""},"categories":[3],"tags":[],"class_list":["post-5100","post","type-post","status-publish","format-standard","hentry","category-stock-trading-strategy"],"_links":{"self":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/5100","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/comments?post=5100"}],"version-history":[{"count":1,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/5100\/revisions"}],"predecessor-version":[{"id":11208,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/5100\/revisions\/11208"}],"wp:attachment":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/media?parent=5100"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/categories?post=5100"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/tags?post=5100"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}