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IMPORTANT POINTS
1. Accumulation is the period of preparation which supplies the momentum to a particular upward move.
2. The force of demand being overcome by supply may be shown by the tendency of the price movement to flatten out or arch over.
3. In distribution, the force of supply is such that it overcomes the force of demand.
4. The momentum of an upward (downward) movement is reflected in its angular rise (decline).
5. Trend lines are used to visualize the momentum of various movements.
6. The threatened violation of a trend line is often an indication that the force of supply or demand which was in effect is now becoming exhausted.
7. The violation of a trend line may indicate a change in the trend.
8. The quality of buying or selling at or around the point of penetration of a trend line determines whether this is a change in the trend or merely a temporary penetration.
9. Every congestion area need not be an area of accumulation or distribution, for it may merely be a trading range.
10. Trend Lines –
a. Support line: identifies the angle of advance by passing through two successive points of support.
b. Supply line: identifies the angle of decline by passing through two successive points of resistance.
c. Oversold Position Line: a line parallel to a supply line through an intervening support point.
d. Overbought Position Line: a line parallel to a support line through an intervening supply point.
11. Locate trend lines first on your vertical charts and then on your figure charts.
12. Trend lines give possible indications as to where support or supply may be expected to enter as an opposing force.
13. Shrinking volume is a normal characteristic of a technical rebound following a selling climax.
14. Do not interpret trend lines mechanically. Don’t use them alone.
15. Intermediate and major trend lines are more important than minor trend lines.