|Speed Resistance Lines|
Speed Resistance Lines
Speed Resistance, or Speedlines, are a combination of percentage retracements and trend lines that change with the trend.
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:
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.
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.
Also see trendlines and Fibonacci arcs & retracements.