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Speed resistance lines

Combining the trend lines and percentage retracements, another method of technical analysis was created: speed resistance lines (or speed lines). This method was developed by Edson Gould. It measures the size of the growth or decline of trend.

In an upward trend speed resistance lines are drawn by creating first vertical line which connects the highest point in the trend with level where the trend began. Vertical line is divided into thirds, and then two speed resistance lines could be drawn from point where trend start to points which divide vertical line. That way two lines are drawn which represent one-third and two-thirds of the trend. In the case of downward trend, the construction is done by using the vertical line which connects the lowest point in the trend with the level where trend began.

Speed resistance lines
Speed resistance lines

Note that whenever a new maximum occurs in the upward trend, the speed lines must be redrawn. The same goes for a new minimum in the downward trend.

When the trend correction occurs, it usually stops when price reaches the level of line 2/3. In the case of its penetration, correction will drop the price to the line 1/3, and if breakthrough occurs on that line, the price will probably go back to the level of the beginning of the trend.

Speed lines reverse they roles in case of penetration. Thus, in the upward trend when line 2/3 is penetrated line 1/3 becomes support and line 2/3 becomes resistance line.

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