Tuesday, 28 April 2009

Trading Update - A lesson in drawing Trend lines

I was filled today on my Wellstream (WSML.L) order as the market continued to react to Swine Flu fever!

I've been drawing trend lines on the graph all day (I know, I am trying REALLY hard not to look at these blo*dy things during the day but...). Take a look at the trend line defining the bottom of the upward channel that I drew on Wellstream yesterday when working out where to place my Buy Limit

Check out the badly drawn channel base trendline - Note how it is drawn directly through a couple of candles....













Now, check out a much more accurately drawn trend line, that doesn't cut through candles. Note how the stock respected the trendline today














As you can see from the second graph, Wellstream hit support today at/around 505 which, looking at the second graph, does more clearly indicate the channel base.

LESSON LEARNT: Draw your trend lines against what you see, not what you want to see! I used to used a Line in Close graph to draw Support and Resistance levels. I'm going to experiment with this approach once again.

Check out the updated portfolio to see how badly Wellstream behaved on its first day in the AtticFund!
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