To the right technical studies are examined in more detail to provide a sense of conformational evidence for traders of the critical day. Click on any of the terms to take a closer look at a technical discussion on that topic. All formations, patterns, indicators and technical tools fail at various times and so should only be used to build a body of evidence in forming a trading decision rather than being solely relied upon. There are a number of valuable studies that lead to intuitive understandings about price and volume but a strong compliment to technical analysis is an understanding of the trends and changes in the fundamentals and economic activity that ultimately lead valuation levels in the markets. A trendline is an indication of levels of support and resistance in the market place.
Price ranges, and extremes in price are smoothed in a way by using trendlines.
In a fashion, trendlines help us to determine acceptable valuation levels during a certain time period. Longer term trendlines can indicate the various support or resistance levels of price that is mutually agreed through free market operations. As time and conditions change, so do the perceptions and evaluations of value, which leads to penetration of previously held valuation beliefs. Penetration of a long term trend line is an indication of changing supply and demand and could point to a trend reversal Price break from a pattern or indicator can lead to a trading opportunity through early recognition of a change in the basic supply and demand forces at work behind the market price. When looking at any pattern or indicator it is best to have confirmation of price and supporting evidence for the new direction of prices before making any trading decisions.