Technical Analysis Made Simple: The Power of Trendlines, Support and Resistance | James Nguyen | Skillshare

Technical Analysis Made Simple: The Power of Trendlines, Support and Resistance

James Nguyen, Professional Money and Lifestyle Manager

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11 Lessons (42m)
    • 1. Introduction

      3:21
    • 2. The Most Important Concept in Stock Charts

      4:53
    • 3. How to Use Trendlines as Support and Resistance

      4:22
    • 4. Secrets of Drawing Trendlines

      4:58
    • 5. Trading Breakouts as Powerful Buy and Sell Signals

      3:13
    • 6. Using Moving Averages

      4:56
    • 7. How Daily vs. Weekly Charts Differ

      3:29
    • 8. Trading Walkthrough: Buying Disney

      4:11
    • 9. Trading Walkthrough: Picking a Low

      2:38
    • 10. Trendline Catalysts Summary and Trading Tips

      4:23
    • 11. The Next Step in the Stacking System

      1:07
47 students are watching this class

About This Class

Should I buy or sell?

It’s the #1 question traders and investors are always asking, whether they’re beginners or experienced pros.

This class will give you powerful tools to help you answer that question.

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The Power of Trendlines, Support and Resistance is an end-to-end guide to the most important tools in reading a stock chart and making that smart buy or sell trade.

This class is the second in a series that will teach you the essentials of technical analysis and stock trading to help you make smart, profitable investing decisions. You’ll focus on the most important technical indicators and put it all together into a process that I actually use as a professional hedge fund manager. 

My classes are built around my Stacking System, a step-by-step process to analyze any price chart using simple, classic technical analysis.

If you can follow a recipe, you can learn my system. 

Technical analysis will give you an edge in trading, day trading and investing in anything from stocks and penny stocks to Bitcoin and cryptocurrency.

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I'm James and I've been a professional trader and hedge fund manager for over 20 years, trading billions of dollars. I'm active on Twitter using @marketmind3 and on my website marketmindtrading.com. I post trading and market analysis live, where I can't hide and fake my results.

My teaching style is focused on being simple and easy-to-follow. I'm also a big believer in using visual aids and live, video walkthroughs as often as I can, so you can look over my shoulder as I apply my concepts. 

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This class will cover every aspect of trendlines, support and resistance:

  • Lesson #1: Introduction
  • Lesson #2: The Most Important Concept in Stock Charts
  • Lesson #3: How to Use Trendlines as Support and Resistance
  • Lesson #4: Secrets of Drawing Trendlines
  • Lesson #5: Trading Breakouts as Powerful Buy and Sell Signals
  • Lesson #6: Using Moving Averages
  • Lesson #7: How Daily vs. Weekly Charts Differ
  • Lesson #8: Trading Walkthrough: Buying Disney
  • Lesson #9: Trading Walkthrough: Picking a Low
  • Lesson #10: Trend Catalysts Summary and Trading Tips
  • Bonus: The Next Step in the Stacking System

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Understanding technical analysis will change the way you trade and give you control and confidence over your investments. My course will transform you from a “close-your-eyes-and-hope” beginner to a smart, consistent trader. If you want to learn how to read a stock chart, understand technical analysis and trade with confidence, you’re in the right place.

Transcripts

1. Introduction: should I buy or sell? It's the number one question. Every investor or crater always asked whether they're a complete beginner or an experienced trader. And it's the question I'm going to give you the tools to answer right now. Welcome to technical analysis Made simple. The power of credit lines, support and resistance. This class is the second part of a series that will teach anyone how to analyze stock charts even if you're a complete beginner. Trendline support and resistance are the most important concepts and technical analysis, and this class will teach you how to identify them and maximize them as powerful buy and sell signals. It's the first step in learning my simple, repeatable process to analyse the stock index or Cryptocurrency chart and make a smart buyer cell decision. I call my process the stacking system. We're gonna look for the three C's a catalyst, Ah, chart pattern and confirmation from technical indicators. The first step is to identify a catalyst for a trade. Is there a change in the stock prices trend or has a stock price broken above or below a certain level that makes us want to make that trade in my process. The brakes of trend lines, support and resistance is often that catalyst. Hi, I'm James. I teach people how to read stock charts and trade with confidence. I have 20 years of experience as a hedge fund manager. I've been in front of the screens for decades, trading billions of dollars, and I believe anyone can learn to understand technical analysis. I'm not a paper creator who learned from a textbook I trade riel capital and post live trading and market analysis on my Twitter and website market mind trading dot com, where I can't hide or fake my results. My process both in how I teach and how I trade, is to keep it simple so you don't have to be a finance wiz or a mass genius to learn how to read a stock chart. If you can follow a recipe, you can learn my process. I've designed my course to be a series of classes will devote a whole class toe. One aspect of my stacking system that'll lead us dive deep into the most important concepts of technical analysis. Concepts like trendline support and resistance chart patterns and technical indicators along the way will use live video walk throughs in each class to really illustrate each concept, and at the end, we'll put it all together with full live video will walk throughs of all my trading concepts and my full stacking system process in action again, this class will focus on trendline support and resistance the first see in my stacking system the catalyst. Now, if you haven't already completed the introduction to stock charts and technical analysis, the first class in this series, you might want to do that just to give you some framework. Otherwise, feel for you to dive right into this class here, we're going to cover every aspect of the topic, the most important concept in stock charts. We're gonna learn how to use trend lines of support and resistance and how to draw these trend lines and understand why breakouts are such powerful buy and sell signals. And, of course, of the end, as always, we're gonna have live video walk throughs of these concepts in practice. So if you want to make more money trading or increase profits from investments you're already making or understand what a chart is telling you so you can stop guessing when you buy ourselves or use long term strategies so you don't have a stair and stress at your trades every minute. You're in the right place right now and let's begin. 2. The Most Important Concept in Stock Charts: First, we're gonna talk about trend lines, and in my mind, trend lines are the one most important thing you need to know to trade stock charts Now, travelers may sound like a simple concept, and they are, Ah, But even though their basic trend lines and the ideas of support and resistance, which will talk about, are really the foundation for almost all technical analysis, there's an old saying in trading that the trend is your friend. And that's something I really believe in. Um, and it's a simple concept, but as you know, I'm all about simplicity. So as we go through my stacking system and looking for the three C's, we always want to start off with some sort of catalyst. Did the stock price do something different? Was there a change in how the stock price was acting that causes us to even look at a trade ? Ah, and oftentimes that change that catalyst is the stock price breaking some sort of trend or going above or below a level that you wouldn't expect it to? So if we pulled up a stock chart like this and gave it to a 10 year old and ask them. What is the trend? What would he say? Well, he probably look it and say, Well, the trend is up. And if we more specifically said, Okay, let's just take this area where it was trending up and asked them to draw a trendline draw , some sort of lined that shows that trend. Ah, he might draw something like this kind of showing the tops of how that stock was trending. Ah, he might, drawing on the bottoms where the lows were and, you know, kind of like as it was trending up. Ah, sometimes I've had people even just dropped right in the middle and say, Well, the trend is up and this is kind of like the average of how it was trending. Ah, and it'll be right, you know, they're all conceptually focusing on the uptrend. Ah, but what we really want to do for our purposes is focused on trend lines as either support or resistance. That's where we want to draw arc red lines and use them as as catalysts for how we're gonna trade. So what does that mean? So support is a level that a stock price doesn't break below. So let's pull up the stock chart like this and just look at this area right here and see if we can identify some sort of support level some sort of floor that the stock price would hit. Ah, it might look something like this, right? You can see almost visually that every time the stock price would hit this level, the stock would bounce up. It was like a clear floor for that stock price. If we were to draw a trendline, it might look something like this. If we drew that's horizontal line, we would call it horizontal support on every time it hit this level, we would expect it to hold. We would expect it to be a floor. And resistance is kind of the opposite, right? It's a ceiling. It's a level that the stock price doesn't break above. We can actually pull up the black seems chart we had before. Ah, and again just focusing on this area right here. Can we visually see a level? There was a ceiling, a level that the stock price wouldn't break above. Clearly it looks something like this right around this level. It was a brick wall, and every time it would reach this level, the stock price would sell off. And so we could draw a horizontal resistance line representing this ceiling, representing this resistance where every time it would hit, we would almost expected to sell off. So what creates these support and resistance line? Why do stocks hold these levels? Well, one of stock price swings. What's really happening? Remember, a stock's price is really a battle between buyers and sellers. So support levels levels where stocks bounce off of our lows, where basically, buyers overtook sellers. Um, you know, in other words, the stock hit of value that Mawr investors found attractive and piled into by Why did that happen? Well, sometimes a stock will just hit some sort of fundamental valuation level that MAWR investors just find attractive. Sometimes there's good news. Sometimes the market's strong are sometimes just one side exhaust itself right? You just run out of sellers on buyer interest overtakes it. But whatever the reason, the conclusion is the same. The stock hit a level where there were more buyers than sellers on. That's important. Obviously another thing to keep in mind with support levels is these are also levels where buyers who stepped in will start losing money if it trades below. And that's why we'll see later on why support levels are so important. But again, remember, important battlegrounds create support and resistance. So when we think about support and resistance, a lot of times will look for previous highs and lows. Ah, and other major turning points and also areas of just congestion and consolidation where there are a lot of back and forth movement. These are all important levels to watch for when we're thinking about support and resistance, and because support and resistance represent these important levels. Breaking them are a big deal, and that's why I'll use tests of support or resistance or breaks of support and resistance as a key catalyst as a key trigger for many of my trades. 3. How to Use Trendlines as Support and Resistance: So let's go back to the idea of trend lines. Ah, and again, remember, we're gonna use trendline support and resistance as signals and catalysts for all of our trades. Now we've talked about support and resistance, particularly horizontal support and resistance. So if you draw these horizontal lines at previous big highs and lows and big turning points , we know why those are important, right? Because basically at the's big turning points, it signifies some sort of change in buying and selling power. But another basic but very powerful thing you always want to pay attention to is the trend of the stock, how the price action is trending. So having a clear understanding and guide for that trend is really important, because it will signal whether or not that trend is changing or continuing. So we're gonna focus on trend lines as either support or resistance. And we're gonna draw these trend lines to establish that kind of support and resistance. Just like with the ideas of previous supporting resistance where we we drew him around previous highs and lows and turning points. Ah, you can see turning points on highs and lows within an up trend or a downtrend as well. So in an uptrend, we want to focus on support of that trend. Eso In this case, I drew some lines here again at the bottom of this trend because we're trying to establish what support would look like on the reason we're trying to establish. What the support would look like is because if it was a was able to break that support, it would signal maybe an end to that uptrend eso. In this case of this uptrend, we had to stop trending up and that's selling off. And then the selloff stopping at some point in establishing ah, higher low, which actually established that uptrend and then continued up eso In this case, this would be kind of the dominant uptrend here. And as it ramped up, we could ask Establish a more kind of like steeper uptrend in this case. Ah, but along the way, you can kind of see how it respected this uptrend. Ah, and in this case, it respected this uptrend multiple times where every time it what's it established these kind of big swing lows. If we were draw line here every time it tested it, it s touted. It bounced off of it just like we did when we do. There's horizontal supports and continued higher. So in either case, when you're drawing these uptrend lines and establishing the these uptrends, the important part is toe. Think of them as levels where, if it were to break down below, it would signify some sort of change in action. And usually what we'll do on any chart will look at is to draw multiple areas of supporting resistance, both putting horizontal support and resistance levels and dominant trend lines on the same chart. So we can really have a good picture of levels that we think are going to be important. One common theme that will come up a lot when we're drawing these support and thinking about support and resistance lines is the idea that resistance becomes support and support becomes resistance. I'll give you an example right here. If you take this chart here, you can see the stock bouncing around. And if we just focus on this area right here, this first swing high, where they established the where the stock establish a high sold off, we do lines right there and said, Well, that's an important level because the stock sold off and we would expect it to next time. Get there. Could act as potential resistance. Um ah. And in this case, it did, Ah, couple times, right. So it near that level sold off, held this support level right here. And when it got to this level again, ah, it sort off a little but then was able to break through. So the fact that was able to break through this resistance level is significant. And you can see once it established a break of this resistance level because it was sister an important level. When it went back to re tested, that level became support on. You'll see that a lot. So when we drawing are trend lines and resistance lines, these big swing highs and these big levels of resistance and support often will will continue to be important levels toe watch, whether we're drawing horizontal lines or trend lines 4. Secrets of Drawing Trendlines: remember when we think about buying or selling a stock, when we think about doing a trade, were always going to start with some sort of catalyst, some sort of reason to buy or sell that stock. Ah, and usually that buyer cell signal is gonna be a break or a test of support or resistance because, as we said, breaking important levels like previous highs and lows and any other turning points or any other levels that have established them as supporter resistance are important. So a break of support often results in a flush of selling. And on the flip side, when a stock is able to break through a previous resistance level an important level where there previously a lot of sellers came in that's often a really bullish signal and often signifies additional buying. And now, as we think about trend lines and establishing uptrends and down trends and what those mean , we're gonna think about it the same way right when a stock is in an uptrend and it has established at uptrend with higher lows on a steady rise. When it breaks that uptrend, when it breaks a level where you would expect it to hold and bounce off. That's also a really important, especially when you have multiple support breaks. So a stock that's in an uptrend and breaks that uptrend, and on top of that breaks ah previous support level that you would expect it to hold. Usually, those multiple signals of weakness and selling pressure will result in just bearish action and follow through on the downside. And on the flip side, if a stock is able to break through a downtrend and break above resistance, that's normally a very bullish sign again. It's a sign that buyers have overtaken sellers and are able to break through down trends and break through resistance and send the stock higher. But generally you want to use some basic guidelines. When you're drawing these support and resistance in these trend lines, you want to look at major highs and lows. Obviously, there's a lot of highs and lows you can pick, but you want to pick the big ones, right? You don't want to pick every little zigzag. Ah, but if you notice these big swings at last multiple days or weeks, those are the ones you want. Draw your lines around and think about it Supporting resistance. Ah, you want lying to touch of multiple points? Because if they touch multiple highs and lows, particularly trend lines, it really establishes those as important levels. Ah, lot of times you want to zoom out. Um, right. You don't necessarily want to focus on little tiny periods because you can see in little tiny period there's uptrend and downtrend all the time. But if you zoom out, you can really get a big picture for really important levels that have held over longer timeframes. Ah, and you know, along those lines, you want to use longer time frames for your charts in general, right? So as opposed to using daily charts sometimes, Ah particular, you're more longer term focus. Use a weekly church or even a monthly chart to draw your lives and to really establish long term important supports and resistance. So, you know, in this case we might draw lines where again made major highs and lows in this uptrend. Right? So this was kind of, ah major low that it was established that we would draw trendline here. You know, in this case, it's great because it cultures multiple points along those same lines when the trend got a little steeper at this level and established this riel kind of like big, important swing low. That's an important trend line. And, you know, as we drew it, we could see how it just touch multiple points. You know what? It wasn't exactly a lawyer. Trend lines are going to be exact. Ah, but you know, you want to draw them toe kind of touch as many points as you can. And when we're thinking about resistance and down friends, we want to do the same thing, right? So in this case will zoom out. Ah, and really kind of look at the big picture and say What is a kind of a really important downtrend where if it was to break, it would be something that I would make note of something that I would say. Okay, well, that's it was established downtrend. There was important and breaking through it is also important. A same time with resistance. Again, I drew this resistance line here where it would have acted as previous support multiple times. Ah, and again it's not exact. It doesn't touch exact exactly the highs and lows. But you know you can move the line around to really just kind of give you a big picture for where you think support or resistance would be. In this case, once it broke this line, kind of like goes through and touches many, many points. Ah, and this would be a line I would use as horizontal resistance where if we were to break through, I would say, Well, that's that's a big deal. Remember, we always want a reason to buy or sell a stock. We want to see something in the price action that's telling us something about what that stocks doing and telling us something either bullish or bear story. And if we really focus on doing that over the long run, it will keep us in better trades and keep us out of bad ones. 5. Trading Breakouts as Powerful Buy and Sell Signals: So now that we've talked about trend lines and support and resistance on how we want to draw them on our charts, how are you gonna actually use them in my system? How are we gonna use them? Ah, as by signals or cell signals. So for by signals, it's pretty simple, right? I we're going to look for certain things that you, ah would expect to look for right? So if a stock has been trending down Ah, you would want to look for a break of that downtrend as a potential buy signal. Ah, you would look for breakouts above resistance levels, you know, resistance level that you would expect it to to sell off from if it breaks out above. That's that's a bullish sign on that could be used as a bicycle. Similarly, on the opposite end. If a stock is in real uptrend, you can buy touches of support because that would be an area where you had expected to hold . And so if we were to buy it, you would expect that to be a good level to buy. Ah, and in general, kind of like, ah, looking at all these things you want generally a bullish configuration of the moving averages. Um and so if you put them all together in a lot of times, you'll actually have all of these things coinciding. There would be what you would look for kind of four for a potential by Ah and Justic expand on that. You know, when you're buying breaks of down trends or breaks above resistance Ah, yeah. You want to look for multiple breakouts? Multiple breakouts of horizontal resistance, downtrend all kind of happening at the same time. That would just give you a better signals. Ah, for for for what you're looking for. Um ah. And also similarly, if you are buying some sort of break of a downtrend, you want to look for at least some sort of levels of support below it, right? It just makes you more confident your by, because even if you're breaking or if you're even if you're buying ah, break of some sort of downtrend. If their support below it gives you kind of some sort of floor and some sort of like some sort of safety net where if you're buying some sort of downtrend, Lisa, there's a level that below it where, ah, that might find support if you're not buying the exact bottom. Ah, and of course, when you're buying, you want to zoom out and look at longer time frames just for context. Right? So if you're buying something on a daily chart where you see a daily downtrend break, maybe zoom out Ah, and look at a weekly chart and see Ah, you know, Is this in a bullish configuration? Is there some sort of ah weekly signals coinciding with the daily signals I'm looking at? Um, also, you know, I talked about buying when ah, stock is touching support. Ah, you know, when you're doing that, you ideally want to make sure the stock is in an uptrend with a bullish moving average configuration. So when that's happening, that's really when you want to focus on buying the touches of support because there's there , you know you have a stock that's already bullish. Um ah. And you know, as a trades down, you're picking that spot where you would expect that trend up to continue 6. Using Moving Averages: another really important and commonly used tool in Ah, people who read stock charts are moving averages. Basically these moving averages lines right here, There it's this purple line here it's this green line. It's this yellow line. Basically, they track the trailing average price over some recent time period. Right? Um, given example, this this purple line is the 50 day moving average. So basically, at each point, it marks the trailing for average price over the last 50 days. And so, obviously, with a stock prices trending up, that moving average will also be trending up because you're basically taking the average price over this. You know, the previous 50 days and because the stock price is trending up, that that average stock price or that average prices also going moving up. And so this 50 day moving average is gonna be moving up as well. And so these moving average lines are there. They're comin guides to kind of smooth out price action. Right? So if the price is kind of all over the place and jumping up and down, but the trend is basically up, it's just a way to kind of track how Ah, just like a smoothed out average price over the period. Period is trending. Ah, and and so the most commonly used are the 50 day, the 100 day in the 200 day moving average. And a lot of times people will put it all in the same chart, right? So they can kind of track the 50 day, which is kind of a shorter time period, the 100 day, which is a little longer in the 200 day, which is a little longer. So you kind of get a long medium or ah, short, long and medium term moving average just together give you more insight into and how the price has generally been trending real quickly. Just to show you how you would add this to a stock chart, you would just pull up your your app or whatever service you're using. Ah, goto indicators or studies. Maybe they would call it and just type in moving average. They'll definitely be there. Ah, and then normally want at a few you want to change the settings to, you know, kind of different time frames. Normally, this again, the standard is 50 day, 100 day and 200 day. That's it. Then you'll have. You'll have it on your charts and you can use them so similar to trend lines. Because moving averages represent the overall trends of prices over last, ah, over some time period. There also uses support and resistance levels on, and a lot of people trade around it. Right. If you have, ah, stock gets too far from all these moving averages. A lot of times, people will expected kind of pull back on. When it does pull back. That's kind of the level war people will buy it it all right? You can kind of see right if you just look at the chart. I circled a couple of levels of where, ah, you know, stock start pulling back, and it held this 50 day and started trending back up again. Or when I was on this way down and they kind of bumped back up into this the 100 day moving average. It acted as resistance, and I just circled a couple of home. If you actually look at this chart, you can kind of see it all over the place so many times where ah the you know, these moving averages acted as important lines either support or resistance is ah, maybe not significant swings in the price, but at least ah, pause in the stock price. If it did hit that resistance. The other thing that kind of like moving averages do. It's time to give you a general idea of the trend of a stock, right? And so bullish configuration would be when all the moving averages air trending up right? That makes sense. The over the last 50 102 100 days, no matter what time frame you're looking at, stock prices have been trending up. And so that's That's obviously bullish, right? It means the stock has been going up. Ah, similarly bearish configuration where, you know, the the short term averages air lower than long term averages and are trending below them. So in this case, this is a bearish configuration where I'm circling right here, where the 50 day, the most recent trend is kind of below the Mawr intermediate and longer trump credit, in other words, over a shorter time frame. Recently, the stock price has been averaging lower than it has in the past, and so and again, you can kind of look at it. Trans. You can kind of look at the levels where the whether the 50 is below the 100 their 200 day or whatever level you're choosing, whether they're all trending down and you can kind of see this is a bearish trend where everything tends to be trending down. So is again. It's just something to watch for when you're like looking at a stock chart for the first time you can right away, See, is bullish is its bearish. What's my bias going to be? 7. How Daily vs. Weekly Charts Differ: I'm gonna give you an example of, ah, kind of the difference between daily and weekly charts and why weekly charts for a lot of traders is just kind of like a better way to trade cause eliminates a lot of the over trading. Um, you know, it doesn't mean you can't trade daily moves. Um, it just means you have to realize kind of what you're doing that it's that it's a shorter time frame, and there's more potential for kind of, like, whips. All action. You know, this is Disney ticker, D i s You know, if you were long it and were trading just on this daily chart back in December, um, you can see where it it, you know, it broke. Kind of like, if you're drawn an uptrend here, it broke this uptrend broke the funeral, the some of these moving averages. And you know some of these support levels if you, you know, if you had Ah, you know, if you were kind of watching it and, you know, had these lines and, you know, this is an important line, obviously where it was, uh, resistance here is kind of a breakout retested held his support, and it kind of bounced around this line for a while. Ah, but you know, if you know, this was certainly ah, break of that support, but before that had broken down train. And so maybe you would have been scared and kind of, like stopped out of your position. And that's reasonable. Um, but, you know, it's a year if you were creating daily right now, and the way you do it is you protect yourself by getting out of this position. Ah, and see how it and handled the retest of that line. So if it was But the trial was turning bearish. You basically see ah, you know, kind of retested, flying, fail and then just keep going down, making new lows. Instead, it broke above and started kind of a more of a bullish formation. But what I want to do is so that's the daily would have kind of stopped you out of it. Ah, but you know, if you were just training weekly charts, you can see where again we're going back to. This is weekly, So it's a much longer time frame. Ah, and we go back to that kind of December late December 2018 period. That drop, which was the drop we just saw in the daily, really didn't do much damage to the chart, right? And so, you know, where is the daily You might have looked at and said While that was kind of a scary fall, I need to get out of it, Really? On a weekly basis, nothing really happened. In fact, actually, if you do a trendline Ah, you know, it would have held the support held to support certainly held to support. That seemed to be important, right? If you just draw a horizontal line, just ballpark like that, start right here, because, ah, you know, this is, like, kind of a really longer term. It wasn't even close to that. But let's say, you know, we draw one even here, right? Because there was a support level here. You You know, there's a lot of people will be looking at this line if they drew it, you know it. This held this support area, and so it held this support area, held the trend uptrend line. So really, you wouldn't have done anything if you were trading the weekly chart. Um And so it just kind of shows you that, you know, when you're even before, if you are trading daily chart sometimes to take a step back, look at the weekly chart and saying, Is this really something I need to panic about? Ah, or is this really something that ah, you know, on a longer term basis is as meaningful is that might feel on on a short term basis? 8. Trading Walkthrough: Buying Disney: So let's walk through an example of how you might use trendline support and resistance. Kind of an alive scenario. Ah, here's a chart here of Disney and let's say you liked this. Let's say you wanted to buy it. Um ah, but you're just looking for an entry point and you're looking for whether or not you should buy it now or whether you should wait. Ah, and this is what kind of you're looking at when you pull up the chart right off the bat. You see your in a bullish configuration off the moving averages. You have your 50 day 100 day and 200 day moving averages all trending up, all training the right way. So that's bullish. Ah, and you generally have Ah, uptrend, Right? Um, you know, it's depending on the line. You draw, you can you might draw line that it's broken its uptrend. But generally speaking Ah, the stock has been up. Ah, and so that's that's a positive sign. Um and so for me, I would look at it and say OK, well, at least at the very least, I know the stock has been trending up. I know the configuration is good, and so I really do want to look for an entry point, but at the same time, we know it's been trending down. So the question is whether or not we should buy it or whether we should wait. And so we'll start drawing our lives or start we'll start trying to think about whether or not ah, there's some sort of catalysts for what we might want to do right off the bat. I would draw maybe a horizontal support line. You can kind of see Ah, this previous low it Ah, you know, we can just draw that its support. Ah, and we could see right at this point, we were kind of at that level so that it might be a potential by because it's sitting at support. Ah, similarly, we might wait till it gets to this 50 day. Obviously, this 50 day would line up with DiCillo right here, so that might be a better level as well. Um, eso these air to levels where we might kind of watch. Ah, the other thing we want to do is draw, you know, we know at the very least, it made a high here And so it's in some sort of down trade. So maybe we would draw a down trendline from here. Ah, and so, you know, if we're looking at in analyzing a stock, um, we might look at it and say, Well, it had it was in a downtrend, and it's broken above the strong Trent. So that would be a positive cows and its it support eso it arguably would be a buy right here. But if you hadn't bought a to that exact point because either you were waiting for more signals to kind of stack up next to each other. Or maybe you just missed it. Maybe you are. You were looking at this chart a dis point. After that, this traded already happened. You can still kind of like, look at it, you know, fresh. Right. So here, um, this low had established Ah, a new uptrend. So you could draw a line signifying this new uptrend. Um, and what you can see is ah, you know, see, you draw this line from this previous low, it rallied and held back down this level also again. If you were looking at it kind of fresh, you would maybe draw some trendline here. Ah, um, or even here. Right, Because you can see where if you look at these candles, there was this, uh, we're looking for multiple touch points, and this is ah, really established line where the stock established multiple touch points. And again, we're given another entry point because, you know, the stock rallied broke through this resistance line, which had acted as resistance pulled back to their support line, which actually coincides. Now, with this newly established up trend line eso again. Ah, signal where you had multiple levels of support where you could buy, um and you know that again would have resulted in a nice by in this case, where if you had bought right on that multiple levels of support, it would have, like, yielded a nice rally off of here. So there's just one example of how you might think about trades and drawing tread lines on support lines. 9. Trading Walkthrough: Picking a Low: And here's an example of where you might want to look at a buy of the stock gets in a clear downtrend on Is breaking that down friends. So Ah, in this case, you have a stock that has been trending down for a long time. All the moving averages are in a pretty bearish configuration. Um, and so obviously it's bearish. But, you know, sometimes you want to buy low, particularly if there's some fundamental reason you like. It s so what you would do is really just kind of like drawl. Ah, the most dominant trend line you can. Ah, and wait and watch. Right? So here's a line that I would draw. Um, I get not. It's touching, Major. Ah, turning points on and, you know, kind of like to me, it establishes. Ah, Riel, downtrend. Ah, you know, and And you would watch it on. And you know that the first signs of breaking it, that would be significant. But of course, you want to look for multiple breaks of resistance, not just trendline resistance, but horizontal resistance. Eso This might be a level you would watch. Um, you know, maybe Ah, maybe even this level right? A something more near term where this was a big low that was established. Um ah, I get you don't want You don't necessarily need to draw 1,000,000 lines. You just want major ones to at least just give you a guide that says, OK, it's doing something that is noticeable. Ah, And it is in this case, if you drew these two lines, you could say, Well, it was it was able to break this down trend line and break through this resistance which also lines up with this 50 day moving average. That would maybe be a sign of something that I would use as a buy signal. Ah, and in this case ah, it You know, it did play out that way where you know, it first broke through this uptrend and then broke through this resistance line and this 50 day moving average. Ah, you know which. You know, it's obviously it's multiple levels of resistance. Soviet ball right here. You probably would have been happy. It would have been a decent trade for a while. You could've watched it, um, again, we'll get into how we would manage the trade and exit the trade later, essentially just to give you a preview. It's basically just, you know, if it's on, uptrend is established. You kind of look at the opposite, right? You draw a trend line to see if it breaks down below that uptrend, our starts breaking support and that's where you would sell. But for now, we're just focusing on the buy signal. Ah, in this case, the spy catalyst. This this downtrend line on resistance breaks would have yielded Ah, decent, A decent by at least for a little bit. 10. Trendline Catalysts Summary and Trading Tips: So just to summarize all that we've talked about so far trendline and moving average breaks of support and resistance Ah, they may seem pretty simple. Uh, the concept is pretty simple. Uh, but there's still one of the best trading tools you can use. Ah, and the reason is, for all the things we talked about, they're just meaningful. They're meaningful price levels. Ah, that's signified buying and selling that signify trends on that signify sentiment. So if you learn nothing else, watching support and resistance line gives you huge insight into your trading on learning to trade around support and resistance lines and drawing them and just having them on your charts at all times. Ah, you know, can give you insight when you're just looking at ah stock chart. One tip when you're watching these breakdowns of supporting resistance is to watch for retests after these breakouts. You know, oftentimes when, ah, when a stock price will break through some support or resistance level Ah, you know, it'll cost some sort of reaction, but then there'll be a retest of that line. In other words, it will shoot back and try to and touch that line again. from from underneath or from from up above. Ah, and so oftentimes that's kind of where you want to trade. Another thing you want to do when you're watching for these breaks of trends and support and resistance is to look for clusters of important levels and signals and all the words looking for breakdowns of breakouts, of multiple levels that are all agreeing with each other. For example, in this case, Ah, you know, you had ah, this breakdown here of horizontal support, which also happened to be a breakdown of this 100 day moving average. Right? So you had multiple signals, multiple breakdowns, kind of all happening at the same time. Similarly, on the way up. Ah, you had ah retest of this support line of this trend line. Ah, but also it's coinciding right around this area of the 200 day providing support. So you had multiple levels of support. So the more singles you can fly them or kind of like light agree with each other just the better. The signal is them. Or you can kind of way that that breakdown of trend or support Ah, you also want to watch for the overall trends. As we said before, there's bullish configurations of the moving averages. There's there's their stocks and uptrends air down trends. And if those overall trends are agreeing with the breakouts and breakdowns, that just adds confidence in using that as, ah, as a signal. But regard says how you trade just keep in mind, the other important. And that's why they're pretty much the number one, ah, part of my stacking system. There the catalyst there, the reason why you want to enter and look to enter a trade anyway on the the other parts of the stacking system. That chart and the technical indicators confirmation are just waste actually confirm what you're initially seeing from that catalyst. The most common question I usually hear from beginner traders is always should I buy ourselves this stock right on? Oftentimes it's stock. They want to buy the stocks going down, and they just they're asking, Should I buy the stock here? I want to buy it. It keeps going down, and my answer is first, Just look for a catalyst, you know, stock and go down indefinitely. Ah, but what you would at least want to do toe minimize that risk that t not catch that. That falling knife, as they call it, is to wait for some sort of change in that trend. You know, if a stock's trending down, wait for some sort of signal that signifying that that that downtrend has changed on. Oftentimes it's whether breaking above an important resistance level or breaking above ah downtrend line provides you with that that initial catalyst that initial trigger to buy. And as you follow me through later lessons and walk through step by step, how I look at stocks in my process for for deciding on trades, you'll see how the catalyst that these trendline brakes, thes breaks of supporting resistance plays such an important role in in making good traits . 11. The Next Step in the Stacking System: So now you know how to identify trendline support and resistance and why breakouts of these levels are so important. Remember, it's the first step in my three C's process. When you look at a chart, you're always gonna try to identify some sort of catalyst, some sort of change that makes you want to make a trade. The next C in the process is identifying a chart, specifically a chart pattern. There's a lot of them, and we're gonna learn how to identify them and what they tell you and how they can add to our buy and sell process. So be on the lookout for the next class in this series, the chart pattern class. In the meantime, take a second to leave a review. I welcome any feedback. Also, feel free to go to market mind trading dot com and join my free email list for free charts , insights, trading tips and discounts on my future products. Also follow me on Twitter for daily tips, charts and real time trades and market insights. On Twitter, I'm at market mind three dot com. Talk to you soon