Bottom Line and Top
Line
As shares gradually rise or fall
over a period of time, they also swing wildly up and down. How are
we to judge whether our stock will continue to rise?
One way is to copy the graph from
Reuters site (by right-clicking the image) and then to draw support and
resistance lines on the picture using a graphics package (or print out the
picture and draw the lines with pen and ruler.
A Support Line (or
Bottom Line) is got by joining all the bottoms in the graph, while
a Resistance Line (or Top LIne) is got by joining the
tops.
A breakout of a
resistance line can indicate that the graph will now rise more
steeply (or that the market has now become too enthusiastic about this
share). A breakout of a bottom line probably indicates a
cooling or reversal of the rising trend.
The following picture shows Bottom Lines and Top Lines
drawn on a chart copied from Reuters.com.
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