A day trader or longer term stock trader may see the prices violate the trendline briefly during the dayââ,¬â"¢s trading. However, when the trade closes in the direction of the original trend, the trader may be left in doubt as to whether or not the trendline was really broken. Looking at the picture below, you can see just such a situation. Note how the prices dipped under the trendline but still closed above the up trendline? Should this line be redrawn?

Thereââ,¬â"¢s no steadfast rule to follow in this case. Sometimes itââ,¬â"¢s best to ignore this minor violation when the rest of the dayââ,¬â"¢s activity proves the original line is valid. Still, a verteran Swing or Options trader, may want to compromise by drawing a second dotted trendline until it can be determined in time which line is more true. Meanwhile, the veteran Day Trader may be satisfied to leave his trendline as is.

Andy Swan is co-founder and head trader for DaytradeTeam.com.  To get all of Andy's day trading, swing trading, and options trading alerts in real time, subscribe to a one-week, all-inclusive trial membership to DaytradeTeam by clicking here.