First, brief answers to a couple of Subscriber questions, one also relating to trendlines -
OIN SUBSCRIBER QUESTION:
For those who don't know, the MACD indicator is calculated by taking the difference between two exponentially smoothed moving averages of closing prices of 12 and 26-day duration usually these are the only values ever used, although I would just note that Gerald Appel, the trader who formulated the MACD indicator, suggested that a slightly different set of values ought to be used as a sell "signal".
I use the default MACD settings in my charting/technical analysis (TradeStation - TS) application, which are Appel's 12 and 26; TS uses 9 for a MACD moving average and I use that too.
For RSI and Slow stochastics on DAILY charts, I may use 14 for number of days (length), as this is a common default setting. Lately, I've been using 13, part of the Fibonacci number series instead. I also use the next higher Fibonacci number of 21 for slow stochastics and sometimes, for RSI.
For WEEKLY charts, I use 8, which comes before 13 of course, in the 1,3.5, 8, 13, 21, etc Fibonacci number progression. To measure 2 months or 8 weeks is my ideal time frame to look at on a weekly chart.
OIN SUBSCRIBER QUESTION:
The first chart, of the S&P 100 (OEX) below, shows recent rallies stopping exactly at its minor down trendline. Two highs tentatively establish such a line, but with a third point making a better definition. We now have 5 points establishing the down trendline shown below. Meanwhile, the 21 and 50-day moving averages showed the broad area of resistance, but lacked the greater precision useful for trading.
The lower UP trendline, is where I think good support could develop; assuming there's a move down to this trendline, which I think likely. You can't see where the lower points are in the OEX trendline below. There are only 2 lows "defining" this trendline, so this trendline needs a third point to have more confidence in the intersecting point on the line being SUPPORT.
MOVING AVERAGES as SUPPORT/RESISTANCE -
USE OF (TRENDLINE) PRICE CHANNELS
This is not possible on many applications as you take what is given unfortunately. What you can see on the daily chart is what you can also see on the hourly charts, only in better detail
In the S&P 500 (SPX) hourly chart below a series of down, then up trend channels are highlighted. The inability for recent lows to hold the lower end of an hourly uptrend price channel suggests that there could be another down leg here per the down arrow
But then I was also struck by THIS possible uptrend channel on the S&P 100 (OEX) chart, suggesting that support could be found only slightly lower
CONSTRUCTING TREND CHANNELS -
A price channel is constructed by drawing a line parallel to
The second, parallel, line can then initially be constructed with only ONE high or low point, which is a concept quite different than the rule for drawing the underlying trendline. Most charting software will place a line parallel to another, as long as you have a starting point or any one point above or below a trendline.
In an uptrend there are minor price swings that go with and
The chart above shows how an uptrend channel is constructed.
Note here that after the first 2 downswing lows allowed the
There tends to be 3 results after selling pressure, at the upper
If there is a subsequent high that forms that is above the first
The widest point is used to construct the opposing channel line,
Good Trading Success!!