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TitleTrading the Line
LanguageEnglish
File Size3.1 MB
Total Pages45
Document Text Contents
Page 1

Trading the Line
How to Use Trendlines to
Spot Reversals and Ride Trends

eBook

Page 2

EWI eBook

Trading the Line — How to Use Trendlines to Spot
Reversals and Ride Trends

By Jeffrey Kennedy, Elliott Wave International

Chapter 1 - Defining Trendlines
Find out what a trendline is and what it represents.

Chapter 2 - Drawing Trendlines
Learn how trendlines identify resistance and support. Also, find out how to draw trendlines, how to
spot trendline breaks and what a triple fan trendline looks like.

Chapter 3 - Trendline Trade Setups
Discover why trendline gaps and retests are Jeffrey Kennedy’s two favorite trendline trade setups.

Chapter 4 - Trendlines and the Wave Principle
Find out how the pros utilize trendlines in conjunction with the Elliott Wave Principle. Also, throw
under and throw over are defined.

Chapter 5 - The Kennedy Channeling Technique
Jeffrey Kennedy explains his own channeling technique, which is a simple way of drawing trendlines
that also helps identify Elliottt waves.

Chapter 6 - Questions and Answers
Jeffrey Kennedy answers questions asked by Trading the Line webinar participants.

Introduction
My name is Jeffrey Kennedy, and I’m the editor of Future Junctures. In Trading the Line, I will explain several

Editor’s note: This webinar was originally presented live in January of 2008.

1
Trading the Line — How to Use Trendlines to Spot Reversals and Ride Trends

— www.elliottwave.com

Page 22

Figure 3-3
Since that trade setup, there was no
price gap above the trendline in Figure
3-3, so there really wasn’t an opportu-

Figure 3-4
The trendline drawn against the ex-
treme continued to go farther down
in Figure 3-4, which created a price
gap at one point. This alerts me to a
buy-side trading opportunity. On the
bar where the gap is up, I place an

bar, while the low of the preceding bar
is my initial protective stop. The trade

pushed on higher.


21

Chapter 3 — Trendline Trade Setups

Trading the Line — How To Use Trendlines To Spot Reversals and Ride Trends
— www.elliottwave.com

Page 23

Figure 3-5
Even if I had not previously drawn
that initial trendline and tried to em-
ploy what I mentioned in the previous

in Figure 3-5. Again, the gap above
the trendline signals a highly reliable
buy-side trading opportunity. My entry

that does the gapping, and my initial
protective stop is the low prior to the
gap, the lower bar.

Figure 3-6

chart in Figure 3-6. Simply connect
two extremes, either two extreme lows

down to the trendline shown and then

indeed, a gap below the trendline.
Therefore, I would initiate a sell posi-

an initial protective stop, the higher
bar preceding the gap, which led to a
very nice trade.



22

Chapter 3 — Trendline Trade Setups

Trading the Line — How To Use Trendlines To Spot Reversals and Ride Trends
— www.elliottwave.com

Page 44

Q. Upon a breach of the base channel, how do I know if it’s all or part of wave 3?

Kennedy: After a breach of the base channel, to determine whether you have reached the end

current length of wave 3. Keep in mind that wave 3 is normally longer than wave 1 and is often

1 within wave 3.

Q. How do I draw the base channel if wave 2 makes a new price extreme?

Kennedy:

be a stronger indication that wave 3 was in force.

Q. When should you use channeling versus a single trendline?

Kennedy: They’re both useful. Channeling (parallel trendlines) is more useful for identifying a

resistance and support levels over the respective time period.

Q. How do I combine the Wave Principle with the material in this course?

Kennedy: You should combine this course’s trendline analysis with all of Elliott’s rules and
guidelines, especially Fibonacci relationships. For example, in wave 4 of an impulse wave, if a
retest of a trendline occurs at a .382 retracement of wave 3, which is common for fourth waves,
and in the area of the previous fourth wave at one lesser degree (guideline of depth), then that

waves 1 through 3, which is a common Fibonacci relationship. That would be a good indication
that wave 5 had ended.

Q. What kind of charting system did you use?

Kennedy:
GenesisFT.

43

Chapter 6 —Questions and Answers

Trading the Line — How To Use Trendlines To Spot Reversals and Ride Trends
— www.elliottwave.com

Page 45

EWI eBook

Trading the Line — How to Use Trendlines to Spot
Reversals and Ride Trends

By Jeffrey Kennedy, Chief Commodities Analyst, Elliott Wave International

New Classics Library

Gainesville, Georgia 30503 US

www.elliottwave.com

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