I tend to see people make trend lines fit too perfectly, which takes away valuable information from the chart.
One technique that I use, that I haven't seen anyone else use, is very similar to the "geometric method" but without forcing everything to fit. In other words, let the breaking of that trend line tell you something.
In a down trend, I extend a trend line from two high pivots (A and B on the chart). I then copy that line to the lowest price between those two points (point C). Most people would extend it from point D, I'd imagine, since it would fit better. However, as all the blue arrows indicate, the line extended from point C worked out better as a trend line/resistance line.
(This isn't the best example, since point E occurred, breaking the high of point A. There wasn't a very good pullback after point E to make a very good drawing. But, this is live data from today, so I take what I can get. ;) )
However, what is valuable is the fall after point E broke below the bottom trend line, which is an unsustainable rate of falling. This tells you the market wants to pullback to one of the two trend lines, which it did.
The same thing happened in the above chart. I drew the line from A to B, then copied it to the lowest price between those two points, point C. The market fell below the lower trend line (point D), indicating exhaustion, then a return to one of the trend lines.
Of course, there isn't any explicit trade setups using this method of trend line drawing, but the subject of this thread was more of "liars or not". I say "not". ;) However, if you are going with the trend and are shorting a pullback, I would feel more strongly if my setup happened at one of these trend lines, than between. OR, if you are looking for a counter-trend setup, it helps if that bottom trend line was broken, because it could help a counter-trend pop to happen (as in the second chart).
As an aside, I am a strong believer in tick-based charts when drawing trend lines. In these charts I am using a 1597T chart on the ES. What that means is that if there is high volume, more bars are drawn, low volume, less bars are drawn. During low-volume times, such as the overnight session, it paints the chart in a much easier to understand way compared to time-based charts (5-min, 15min, etc), IMHO.
Above is a ES, weekly chart. Same thing, but a long case. Connected A to B, copied to the highest price between A and B at point C. After breaking above the top line, we traded in an unsustainable rate, leading to exhaustion, leading to a return to norm (point D). Also, note point E was nice resistance.
Good luck traders!
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