To find a trend line, simply connect multiple highs or lows with a line--the more pivots that connect, the better the trend line. Notice how this works on the SPY intraday chart below. I personally played this breakout for a move to approximately 115.25.
|SPY 10 min shows clear break of trend line leading to higher prices|
Trend lines are a useful addition to any trader's repertoire due to their reliability and straightforwardness in knowing when the trade is working in your favour or not. A break above the trend line is the buy signal and a break back below is the stop out.
Once a trend line has been identified on one of the major indices it's very likely that this pattern will repeat itself on individual stocks. The following charts are trades I took in sympathy to the SPY pattern above.
|Notice the POT.to trend line double as an inverse head and shoulders pattern|
|Trend lines can also be bought on a retest of the initial breakout|
|The 200MA was the logical target on this SU.to trend line breakout|
Identifying prevalent patterns from one day to the next is just as important as identifying key active stocks and sectors. When you see a pattern playing out in the major indices and key large cap stocks, you'll likely see it elsewhere as well. This is a strategy I use in my own trading every day.