Speed
Resistance Lines
Speed
Resistance, or Speedlines, are
a combination of percentage
retracements and trend lines
that change with the trend.
Overview
Speedlines,
developed by Edson Gould, are
a variation on the idea of dividing
the trend into thirds. The main
difference from the percentage
retracement is that speedlines
measure the rate of ascent or
descent - or "speed" - of a
trend as it develops.
In
an uptrend the speedlines are
drawn by:
- Drawing
a line vertically from the
base to the highest peak
(shown as a blue line)
- dividing
this vertical line into
thirds
- drawing
speedlines (shown as red
lines) from the beginning
of the trend through the
1/3 and 2/3 points
- The
upper line is often referred
to as the 2/3 speed line
and the lower line as the
1/3 speedline
As
the trend develops and new peaks
(or valleys in the case of a
downtrend) are formed the vertical
line is redrawn and new speedlines
are added.
Signals
Uptrend:
If a correction is underway
in an uptrend, the price will
usually stop at the upper speedline.
If the price penetrates the
upper speedline, however, this
is often a good indication of
a trend reversal and can be
used a sell signal.
Downtrend:
In a downtrend, a penetration
through the lower speedline
signals a likely rally to the
upper line; and if the upper
line is broken this usually
indicates a continued rally.
Additional
Information
Also
see trendlines
and Fibonacci
arcs & retracements.
