Here's Why Trendlines Are Your New Best Friend
See how trendlines help you manage risk in this real-world example from this free eBook
by Nico Isaac
Updated: September 09, 2014
One of the best aspects of technical analysis is also its biggest drawback: Namely, there are far too many indicators to choose from.
Candlesticks to channels, Relative Strength Index to Bollinger Bands, double tops to moving averages...
Geez! With so many options, you're liable to feel like a "hanging man" beneath "dark cloud cover."
But in reality, all you need is one good, solid place to start; one indicator that can be your technical rock of Gibraltar.
For our chief commodity analyst Jeffrey Kennedy, that honor goes to one of the oldest names in the book: trendlines. Back in 2004, Jeffrey went on the record with this tribute:
I believe that trendlines are one of the simplest, yet most powerful tools an analyst can employ. An early mentor of mine said it best when he pointed out that "a kid with a ruler could make a million dollars" by simply drawing trendlines on price charts.
Today, we're are going to see how Jeffrey used trendlines to identify lasting levels of price resistance in the most popular grain market, corn.
In his April 2014 Monthly Commodity Junctures Wave Watch video (above), Jeffrey showed subscribers how a four-month old trendline ensured that corn's upside was limited.
The next chart shows you how corn prices did indeed bump up against their long-time trendline, reversed, and sold off in a powerful decline to their lowest level not just for 2014 -- but their lowest level in four years.
Here's another excerpt:
Look where the upper boundary line provided resistance [in Google]. Notice there is another use for it. The midpoint of the trendline provides resistance in four different areas, which is why I include the center point or the midline when I draw parallel trendlines or price channels.