Trend lines don’t always work. News Flash. That doesn’t mean they are useless, in my opinion.
A trend line is just a graphic way to show potential support or resistance. Emphasis on potential.
Look at the example below in December Gold.
Traders looking for a support level to buy against have been watching the trend line. Going back to the July low at 1182. The second point of intersection is 1251 posted on October 15th.
We are trading around that trend line today. 1274 is the intersection point.
The issue is, if this trend line fails, then what? So you go to support at the lower trend line? that T-line has an intersection point at last Tuesday’s low at 1261.
This is where it becomes a judgement call as to which trend line you chose.
Bottom line,
If you are getting long, you need an escape plan if the market turns lower.
If you are getting short, you need an escape plan if the market turns higher.
Food for thought when you are talking about Trend lines.
