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SPEED RESISTANCE LINES
Overview
Speed Resistance Lines ("SRL"), sometimes called 1/3-2/3 lines, are a series of trendlines
that divide a price move into three equal sections. They are similar in construction and
interpretation to Fibonacci Fan Lines.
Interpretation
Speed Resistance Lines display three trendlines. The slope of each line defines a
different rate at which pricing expectations are changing.
Prices should find support above the 2/3 line. When prices do fall below the 2/3 line,
they should quickly drop to the 1/3 line where they should then again find support.
Example
The following charts show McDonald's price and Speed Resistance Lines.
The initial trendline was drawn from the low point
labeled "A" to the high point labeled "B." You can see that prices found support each time
they fell to the 2/3 line. When prices finally penetrated the 2/3 line (at point "C") they
quickly fell to the 1/3 line where they again found support.
Calculation
To draw Speed Resistance Lines:
Draw a line from a major low to a major high.
Draw a vertical line on the day the major high occurred. Divide this vertical line
into thirds.
Draw lines from the major low so they intersect the vertical line at the 1/3 and 2/3
levels.
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