What Are Speed Resistance Lines?
Speed resistance lines are a tool in technical analysis used for determining potential areas of support and resistance in the market. Also known as speedlines, these are trendlines based on 1/3 and 2/3 retracements.
- Speed resistance lines, or speedlines, are a series of three trendlines used to indicate support and resistance levels.
- The first speedline connects a recent high and low point in the asset's price.
- The second and third speedlines are drawn at 1/3 and 2/3 intervals, respectively.
Understanding Speed Resistance Lines
Speed resistance lines are comprised of three consecutive trendlines. where the first is drawn from an asset's most recent low to its most recent high when the asset is in an uptrend, and from the most recent high to the most recent low when the asset is in a downtrend. The other two trend lines are drawn with smaller angles in an attempt to predict areas that will act as possible barriers in the event of a retracement.
Speed resistance lines, however, are not drawn exactly like typical trendlines that use price peaks and troughs. Instead, the first speedline utilizes trend intervals that can sometimes intersect prices at points other than peak or trough. The second and third speedlines are then placed at one-thirds and two-thirds intervals to indicate levels of resistance (or support).
Speed resistance lines were invented by market technician Edson Gould. Gould became renowned for his market savvy and technical ability during the 1960s and '70s.
Reading Speed Resistance Lines
Speed resistance lines operate the same as any other trendline. But, because they use both 1/3 and 2/3 intervals, these mark two levels of interest instead of just one. A break below the first line then leaves the analyst to see if the second line will hold. A subsequent break below the second line indicates a possible trend reversal. In an uptrend, the lines represent support, while during a downtrend, these are resistance levels.
Speed resistance lines are interpreted similarly to the Fibonacci Fan indicator. Many traders will watch for a move below the two-thirds level to signal a continued retracement toward the one-third level. It is important to remember that other technical indicators should be used when the price of the asset is near the trend line to confirm the strength of the predicted support/resistance.