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Thursday, February 17, 2011

Speed Resistance Lines

Speed Resistance Lines

Developed by Edson Gould, Speed Resistance Lines are trendlines based on 1/3 and 2/3 retracements. Gould was a prominent market technician who became quite famous for his market calls in the 60s and 70s. Gould appeared on Wall Street Week a few times and was often quoted in Barron's. Speed Resistance Lines are not drawn like traditional trendlines, which are based are peaks and troughs. Instead, the first line extends from the low to the high in an uptrend or from the high to the low in a downtrend. This first Speedline sometimes cuts right through prices. Subsequent lines are then placed at 1/3 and 2/3 intervals to estimate potential support or resistance levels. Gould also referred to Speed Resistance Lines as Speedlines.

Calculation:
Downtrend                                                        

Downtrend First Line: High to Low
Middle Line: High to 2/3 point
Upper Line: High to 1/3 point

2/3 point: High - (High - Low) x .667
1/3 point: High - (High - Low) x .333




Speed Resistance Lines extending down from the April high. The first line extends from the April high (121.54) to the July low (101.13). The middle line extends from the April high to the 2/3 point, which is two thirds of the way below the April high. The upper line extends from the April high to the 1/3 point, which is a third of the way below the April high. These lines extend to the right as new bars (trading days) occur.


Uptrend




Uptrend

First Line: Low to High
Middle Line: Low to 2/3 point
Lower Line: Low to 1/3 point
2/3 point: Low + (High - Low) x .667
1/3 point: Low + (High - Low) x .333

Speed Resistance Lines extending up from the April low. The first line extends from the April low (86.44) to the July high (102.66). The middle line extends from the April low to the 2/3 point, which is two thirds of the way above the April low. The lower line extends from the April low to the 1/3 point, which is a third of the way above the April low. These lines extend to the right as new bars (trading days) occur.