Speed Resistance Lines
Speed Resistance Lines divide the
trend into three sectors, or thirds. This is similar to Fibonacci retracements,
which are d on 38.2% and 61.8%. In addition, Dow Theory suggests that
securities retrace 1/3 to 2/3 of an advance or decline with a corrective move.
Applying Speed Resistance Lines after an advance or decline provides chartists
an immediate idea of where to expect support or resistance. These Speedlines
can be maintained as is or repositioned as an advance or decline extends with
new highs or lows. Repositioning after a higher high or lower low will widen
the Speed Resistance Lines. This means potential support or resistance levels
will be further away. As with all indicators and line studies, Speed Resistance
Lines should be used in conjunction with other aspects of technical analysis.
They are not designed as stand-alone indicators.
stock signals
Developed by Edson Gould, Speed
Resistance Lines, sometimes referred to as Speedlines, are trend lines d on
1/3 and 2/3 retracements. Gould was a prominent market technician who became
quite famous for his market calls in the 60s and 70s. Gould appeared on Wall
Street Week a few times and was often quoted in Barron's. Speed Resistance
Lines are not drawn like traditional trend lines, which are d on peaks and
troughs. Instead, the first line extends from the low to the high in an uptrend
or from the high to the low in a downtrend. This first Speedline sometimes cuts
right through prices. Subsequent lines are then placed at 1/3 and 2/3 intervals
to estimate potential support or resistance levels.
IC Markets
Speed Resistance Lines work the same
as ordinary trend lines. They can be used to estimate support or resistance
levels and to define the trend. In an uptrend, Speed Resistance Lines mark two
potential support levels to watch. A break below the middle line targets a move
towards the upper line. A break below the lower line indicates enough weakness
to consider a trend reversal. Once broken, the line extensions can then mark
resistance, just as ordinary trend lines do. In a downtrend, Speed Resistance
Lines mark two potential resistance levels to watch. A break above the middle
line shows strength that targets a move to the upper line. A break above the
upper line indicates a trend reversal. Once broken, these Speedlines can then
turn into support on a pullback.
Repositioning and best
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Speed Resistance Lines can be
repositioned as a security extends its trend with lower lows or lower highs. In
the Electronic Arts example below, the first Speedlines were d on the June
high and September low. ERTS forged new lows in December and again in February
as the downtrend extended. The first set of Speedlines are blue, while the
second set are pink.
Forex trading Signals
Speedlines for the December low were skipped
to keep the chart relatively clean. Notice how the Speedlines widened as the
stock forged lower lows. This is because the length of the move from high to
low grew larger - as did the 1/3 and 2/3 retracements. The repositioned Speed
Resistance Lines (pink) were d on the June high and February low. Even
though the stock broke above its January high, the upper Speedline extension
marked resistance in April.
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