Trend Line
A trend line is a straight line drawn on a price chart connecting a series of highs or lows to show the direction and slope of a trend.
In an uptrend, a trend line is drawn below prices by connecting at least two rising lows; it acts as support. In a downtrend, it is drawn above prices by connecting at least two falling highs; it acts as resistance. A third touch is often seen as confirmation that the line is meaningful.
Traders use trend lines to judge the strength of a trend, find possible entry points when price pulls back to the line, and spot possible reversals when price breaks through it. Two parallel lines enclosing price form a channel.
Drawing trend lines involves judgment. Using closing prices versus intraday highs and lows, choosing which points to connect, and selecting linear or logarithmic chart scales can all change the result. Steep trend lines tend to break sooner than gentle ones.
Example: a stock makes lows at $30 in January, $34 in March and $38 in May. A line through those points slopes upward; if the price later closes well below that line, traders may read it as a sign the uptrend is weakening.