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Moves down to an uptrend line are
often very tempting to buy. However, caution is required when the
move is down to an accelerated uptrend line--or worse, a 2nd accelerated uptrend
line.
To illustrate my point, let's take a look at Papa John's Pizza (PZZA | Quote | Chart | News | PowerRating).
This is a 6-month chart and notice the main trend line, trend line A. However,
PZZA starts moving off that line, higher on trend line B. Then again it shoots
off on trend line C. These are called accelerated trend lines. While the quick
and easy profits are tempting, you must be careful. As you can see, once broken,
they often break just as hard as they ran up.
So although if you had bought at the point shown, the green
circle, you'd be very upset, PZZA would still be holding the main, long term
trend line--trend line A.
Watching accelerated trend lines is one of DaytradeTeam's specialties. We use it
daily in our day trading systems as well as our swing trading systems.
Andy Swan
Andy Swan created and co-founded DaytradeTeam five years ago on a principle of empowering individual stock and options traders with the techniques and analysis methods typically reserved for elite professionals. His expertise in technical analysis and commitment to educating members earned DaytradeTeam a top-ranking among advisory services for several years.
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