What is a Thrusting Line
A thrusting line is type of continuation indicator used by technical analysts, which they use to confirm the continuation of a trend in the price of a stock. There are two types of thrusting lines: a bullish thrusting line and a bearish thrusting line. A bullish thrusting line occurs when a stock opens a trading day above the closing price of the previous day. A bearish thrusting line occurs when a stock opens below the closing price of the previous day.
A variation on the thrusting line is a medium continuation thrusting line. A bullish medium continuation thrusting line occurs when a stock opens above the average trading price of the previous day, and a bearish medium continuation thrusting is occurs when a stock opens below the average trading price of the previous day.
BREAKING DOWN Thrusting Line
Thrusting lines are looked for by technical analysts or traders who use past data on stock prices and volumes to predict future prices in stocks. Technical traders operate under the assumption that the vast majority of available information about a stock, bond, commodity or currency is almost instantaneously incorporated in the price by market forces, and therefore it isn’t profitable to make investment decisions based on this information. Instead, technical traders try to divine how stocks will move on a short-term basis by looking at the behavior of markets in similar, past situations.
One strategy technical analysts employ is attempting to identify trends that result from the collective psychology of the market, under the assumption that the market will react similarly to similar kinds of price action, whatever the specific fundamentals of the stock in question.
Example of a Thrusting Line
Let’s say that you want to trade Apple stock using technical analysis. One way to do this would be to identify a thrusting line, and buy or sell based on that trend. Let’s assume that Apple stock has opened on Monday at $170 per share and closes at $160 per share, and the average trading price that day was $165. The following day it opens lower at $155 and then trades up to $159, with a mean trading price that day of $162. These two days of trading indicate a strong bearish thrusting line, because the stock opened below the closing price of the previous day, and failed to increase to the value of the previous day’s close by the end of the second trading day. Despite the fact that the stock rose in price on the second day, the price action indicates that further price declines are to come.