To determine support and resistance levels that correspond to the trend lines you’ve drawn, you simply need to place the cursor of your charting system on the trend line at the current time period. Your charting system should display the price value of the cursor placement on the right side of the chart; if not, you may have to use the crosshairs tool of the charting system to see the value. Keep in mind that trend-line price values will shift over time based on the slope of the trend line. If you’ve identified a trend line that’s sloping steeply higher, for instance, its price value will be higher in later periods. You can run the cursor up the trend line and note the price level and time interval to gauge how much it will change over time.
Note the price levels of the trend lines you observe and use them for placing orders based on your fundamental or technical view. Breaks of trend lines are signals for short-term traders to go with the break. We suggest using a relatively tight stop loss of 20 to 30 points from the trend line in case the break is not sustained (a false break). You can also use trend lines as entry points in trending moves, buying on pullbacks of up moves and selling on rebounds in downtrends. Depending if any chart pattern is evident, the breakout may have a target, or measured move objective, which you can use to establish you’re take-profit order. Again, allow for a margin of error in case the target level is not quite reached. It’s better to capture 80 percent of something than 100 percent of nothing.
Breaks of sloping trend lines always have an immediate hurdle to climb, namely the prior high of a move up in the case of a break of downward sloping trend lines, or the prior low in the case of upward sloping trend lines. Some technical traders disregard sloping trend lines altogether and focus only on breaks of recent highs or lows.