Speed Resistance Lines: A new one on me, and a variation on a theme

One of the problems of having my email address plastered all over the place, is that I get a lot of unsolicited mail. There is an upside though, as sometimes I get very nice letters from people I don’t know. This happened yesterday, when someone who will be sitting the STA Diploma Part 2 paper in October, having studied via our Home Study Course, contacted me. His question: Speed Resistance Lines, developed by Edson Gould, was not covered in the HSC course – but he obviously rates the method – so would it be included in the exam?

Well, obviously, I have absolutely no idea what the exam questions are, so I replied that a question on this specific subject was unlikely, but he should certainly use it as part of an answer to one of them. That’s not the end of the story though, because what he likes, is something I know nothing about. He’d told me it was covered in John Murphy’s ‘bible’ of technical analysis, so I knew where to turn.

It’s an interesting variation on drawing trend lines, linked to a version of Fibonacci retracements, with a touch Gann lines thrown in. You start with a trend you’ve spotted, draw a vertical from the low or latest high, then divide this vertical into 3 equal segments. Mark these points on the vertical and then connect, first one, then the other point, to the starting point of the trend; you’ll have 2 diagonals starting at the same point but at different angles.

On new highs or lows, re-draw the vertical and the 2 speedlines. Corrections can retreat to either the steeper or the shallower speedline. If the latter is broken, the trend has ended and prices are likely to revert to their starting point and the lines reverse their roles, acting as resistance when they had been support and vice versa – classic Dow Theory. Obviously, you’ll end up with different lines as intermediate trends develop, like a brilliant chart in my 1986 Murphy.

Today I’ve copied the chart from stockcharts.com, which I can recommend, because my Reuters Eikon does not have this analysis. Pity, as I think it’s intuitively clear and rather neat.

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Posted in Finance, STA charts, STA education, STA news, Technical Analysis Courses, Trading, Trending

The views and opinions expressed on the STA’s blog do not necessarily represent those of the Society of Technical Analysts (the “STA”), or of any officer, director or member of the STA.

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About Nicole Elliott

Nicole Elliott

A graduate of the London School of Economics and Political Science (BSc Social Psychology) Nicole Elliott has worked in banks in the City of London for the last 30 years. Whether in sales, trading or forecasting technical analysis has always been the bedrock of her thinking. Key expertise lies within all areas of treasury: foreign exchange, money markets, fixed income and commodities.

She has also added to the body of knowledge of the industry writing the first western book on Ichimoku Cloud Charts. Strong media links and a cult following are due to her prescient calls on the markets and often entertaining format.

Nicole can be contacted at trending@sta-uk.org

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