This is the Trading Playbook where the
charts do the talking and every session
makes you a better trader.
Hey everybody, Lawton here with Verified
Investing back with another episode of
The Trading Playbook. Happy Saturday.
Hope you guys are having a great
weekend. Before I get any further into
today's very setting episode,
I just like to remind you to please like
this video, comment, let me know what
you want me to cover next, and subscribe
to the Verified Investing YouTube
channel. Now, that does a couple things.
First off, it allows us to continue to
make free content just like this, and it
also lets me know that you like the
content you're seeing.
Um but yeah, if you have any other
technical analysis concepts you want me
to cover next week, please let me know
cuz we're starting to go back and
recycle them, which is totally fine,
right? I absolutely don't mind doing it
at all, but if there's anything new you
guys want to see, please let me know.
But, in today's episode, I'm going to
talk about trend lines and the power of
trend lines. This is something that
every single one of our traders use here
at Verified Investing. It is basically
the core the core, you know, thing that
we all use
in TA.
Um they're all around us,
and at first, I was kind of skeptical
about them, but I'm going to show you
how powerful they have been.
Now, first off, let's start off with
an example here on Meta,
right? On Meta, you can see what? This
beautiful down-sloping trend line. Now,
a couple things, right? What are trend
lines? Well, trend lines,
if you want to call, are kind of
imaginary lines that I've drawn on my
chart, right? And the way I like doing
it is I love to connect different pivots
to each other.
So, pivot here, pivot here, pivot here,
right?
Three different pivots
um creating this line. It just shows me
that the trend has indicated that when
price pushed in and around this level
it has signaled a pullback.
Signaled a pullback after you hit it,
right?
And it generally just tells me that
price is continuing to stay below it and
continuing over time
to drift lower, right? Hence the word
trend followed by that line.
But the question is, well, what happens
when you can break through it? Let's say
the fourth time here as Meta looks like
it's looking to potentially test this
trend line again.
Well, what is that? That's actually
extremely bullish, right? That means the
trend has ultimately become broken.
And
the stock now is pushing
to the upside. Now, it hasn't done it
quite yet here on Meta, but this is a
clear example of how
trend lines work.
And you basically just need two pivots,
but the more times that you test the
line
right? The less likelihood it is to
hold.
Think about it like a uh
Think about it in movies. You have kind
of a gate or like a dam keeping
something in. In my brain, I always
think about like zombie movies, right?
You have a gate keeping the zombies out.
And let's say it's very well
constructed, but the zombies continue to
push into it, push into it, push into
it. And slowly over time, if you don't
perform maintenance,
slowly over time, the the ties that hold
it together
kind of
get weaker, weaker, weaker. And then all
of a sudden, what happens? The
floodgates are open, they're all pushed
through, and in this case, price can
accelerate up or down. Right?
And with trend lines, it's no different.
Let's take a look at this chart here on
Netflix. Right? This is a little bit
different cuz this was a down-sloping
trend line that hasn't quite broken up
yet, but in this case, we're going to be
talking about an up-sloping trend line
and talk about the violent the extremely
violent move down there
on Netflix
after breaking a trend. So, you see
beautiful up-sloping trend line here.
We've traded around traded in and around
it, right? Maintaining above,
maintaining above, testing it, nope,
testing it, nope, testing it, nope. And
what happened?
When just like those zombies, right?
When the line has officially broken,
when that trend has broken,
boom.
Big fall down from that candle on, it's
about an 8% drop, and that's just so
far.
Now, the question is, well, how do you
play this? Well, you can play it in a
couple of ways. Either short it as soon
as you get the break,
or sometimes you'll see it come down and
then retrace and then look for a larger
move down there.
So, those are two different ways you can
kind of see and play out have these
trend lines play out on different
stocks.
Next one I'll show you guys
is
Oracle.
And I'll show you how it could provide
resistance. Right? In this case, I've
showed you how when a trend line breaks,
it favors the a to that direction. But,
what if the trend line has yet to break
and you're looking for levels of
resistance, what can you do?
Right?
Well, in this case in Oracle,
this is an up-sloping trend line. I see
it push up, push up, push up. You can
actually use these up-sloping trend
lines
in this case as
resistance.
Right?
Because
the trend favors a move up with these
up-sloping trend lines, right? Unless it
breaks to the downside generally. But,
if they are at the upper range, the
upper range, you could use them as
levels to see a pullback.
You see
pushed up into that level and had a
decent pullback, 23%. Pushed up into
that level,
had a nice pullback, 14% pullback. Now,
pushing up again into that level, now
we'll have to see, maybe it gets a 10%,
maybe it gets a little more of a
pullback.
But, these levels are great. Trend lines
are great for finding levels of support
and resistance.
I'll give you another example.
If you watch all of the previous
episodes of Trading Playbook, a lot of
it focuses around finding potential
levels to sh- for support or resistance,
right? And in this case, we're playing a
breakout strategy. But, what happens
when a stock is trading
at or near all-time highs?
How can you find a solid level of
resistance?
Well, let's hop into the chart and we
can kind of find out.
For example, this chart here of VLO,
yeah, so VLO is trading at all-time
highs, right? Continuing to push up and
make all-time highs.
And there's no gap fills.
There's, you know what I mean? There's
there's not a lot here.
But, one thing there always is
consistently
are trend lines.
Right, let me go ahead and see if I
can't do this.
So, this is one example of using trend
lines to potentially find levels of
resistance.
And if you take a look here, you could
argue that hey,
this pivot to this previous high, right?
Connects all the way to here should
provide resistance on
the stock.
Right?
And
you can even do something like this.
Saying that hey, we've actually broken
up
broken this, right? We continue to trade
in and around this nice up-sloping trend
line, and if we can get back down below
it,
this up-sloping trend line,
the break could be the catalyst for
ultimate larger ultimately larger move
down.
So, that's a just another way to use
trend lines. And And trend lines are so
versatile, and I could go on and on and
on about trend lines um
and different setups, but I'm going to
do that in tomorrow's episode. I'm going
to give you three actionable trade
setups uh using trend lines tomorrow
that you can carry into this next week
to uh potentially and hopefully get a
trade make some money.
All right. With that being said, that's
all I have for you today.
My name again is Lawton How here with
Verified Investing. Thank you guys so
much for watching. Please comment on
this video. Please like this video.
Please subscribe to the Verified
Investing YouTube channel. And thank you
guys so much for the uh amount of
support that you guys have given this
series. Um
I really really appreciate it, and we
all love it here at Verified Investing.
Hope you have a great rest of your day.
I'll see you guys tomorrow.
Have a good one. Take it easy. Bye-bye.
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