20 Questions
What is the primary implication of a trendline penetration?
Either a reversal or continuation of the previous trend, depending on the context
What is the significance of a trendline penetration in a rising market?
It may occur at the time of, or just before, the successful completion of a reversal pattern
What is the relationship between a trendline penetration and a reversal pattern?
A trendline penetration can occur simultaneously with, or just after, the completion of a reversal pattern
What is the potential outcome of a trendline penetration, as shown in Figure 6.8?
A consolidation in a sideways trading range followed by an advance
What is the key to drawing trendlines, according to the text?
Applying common sense to identify trends
What is the likelihood of a steep trend being broken compared to a more gradual one?
It is more likely to be broken
What does the area between the trendlines and the parallel return lines represent?
A trend channel
What does the violation of the return line signify in a rising market?
An acceleration of the price advance
What is the purpose of drawing lines parallel to the basic trendlines?
To create a trend channel
What happens when a steep trend is eventually broken?
The trend is no longer valid
What is the primary purpose of constructing a trendline in technical analysis?
To visually represent the underlying trend of a market
When is it necessary to redraw an up trendline?
When the price rallies sharply after a trendline violation
What type of trendline is constructed by joining a series of identical highs?
Horizontal trendline
What is the term for the process of connecting the final peak with the top of the first rally in a downtrend?
Down trendline construction
What is the key characteristic of a true trendline?
It is a graphic representation of the underlying trend
What happens when a trendline is violated with a sharp angle of ascent or descent?
Consolidation is more likely to occur
What is shown in Figure 6.13?
A trendline reversing its role from support to resistance
What is the main difference between arithmetic and logarithmic scales?
Arithmetic scales allocate a specific point or dollar amount to a given vertical distance, while logarithmic scales allocate a given percentage price move
What is the significance of the angle of ascent or descent in a trendline violation?
It determines the likelihood of a consolidation or reversal
What is shown in Figure 6.14?
A trendline reversing its role from support to resistance in a downtrend
Understanding trendlines in technical analysis, including trendline breaks and their implications on price patterns and market trends.
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