Trendline
A line drawn connecting a stock's highs or lows — a tool for seeing at a glance whether the flow is heading up, down, or sideways.
No fixed formula — an uptrend line = a line connecting meaningful lows / a downtrend line = a line connecting highs.
While the price moves above an uptrend line, the upward flow is regarded as holding.
In plain terms
Even when a stock price moves erratically, there is a broader direction. A trendline is a line drawn with a ruler-like stroke connecting the lows (or the highs) so that direction is easy to see.
When lows connect while getting progressively higher, that's an uptrend line (rising to the right); when highs connect while getting progressively lower, that's a downtrend line (falling to the right).
What it tells you
A trendline is not a tool for predicting the future — it is a tool that visually organizes which direction the flow so far has been heading. It lets you see at a glance whether the flow is up, down, or sideways, and whether that flow is holding or breaking.
Like support and resistance lines, trendlines work to some degree because many people are looking at the same line. When everyone moves similarly, thinking "the flow may turn here," that expectation can fulfill itself.
Formula
No fixed formula — an uptrend line = a line connecting meaningful lows / a downtrend line = a line connecting highs. Draw two such lines in parallel and you get a "channel".
What high or low means
While the price moves above an uptrend line, the upward flow is regarded as holding.
Breaking below an uptrend line is read as a sign the flow is weakening, while breaking above a downtrend line is read the opposite way, as a sign the flow is reviving.
Looking back at a chart afterwards, a perfect trendline is always visible (hindsight bias — the feeling of "I knew it" when looking at past events). But in real time it is ambiguous which points to connect, so a trendline that fits neatly usually becomes clear only in hindsight.
Trendlines are drawn differently by different people, so they are not objective. On top of that, whether the vertical axis is drawn on a normal (linear) or logarithmic scale changes the shape of the trendline even for the same data.
It is a tool that looks only at price movement, so it is unrelated to a company's value, and it is not in itself a signal recommending buying or selling.
Metrics to read alongside
See it in real stocks
Search US stocks on Stocklore to see SEC-filing-based financial metrics alongside the sector benchmark.
This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.