I let the chart "tell" me how many lines to draw - I think that this relates to the beta of the stock. Hammers and gaps are the most useful guides in drawing these.
At any particular point in time, the price is only interacting with a few of them. Like I said, this method is just another way of marking support/resistance on a chart.
For horizontal support/resistance levels, what constitutes "too many" lines? For instance, I have this really busy chart of the Comp hourly where I drew the lines as the chart was going up (now off-scale) and they still seem to have validity.
stockcharts.com[w,a]ehclyiay[d30][pd20,2!b20!b50!b200!f][vc60][iut!lb5!la12,26,9!lh14,3!ll14][J19731974,Y]&listNum=75
The ASIA chart I posted yesterday has spent much of the day nicely lined up to the slant lines. At the moment, it has dipped below and is now testing the MA(20) (Sigh, I know - another line).
stockcharts.com[w,a]dhclyiay[dc][pd20,2!b20!b50!b200!f][vc60][iut!lb5!lh14,3!la12,26,9!ll14][J26704173,Y]&listNum=75
On the RMBS chart, what I see is a whole bunch of places where the price has moved parallel to the lines - even after a severe price swing. As I recall, I drew most of these lines in mid-November and added the three lower lines during the morning when it put that big red candle in in February. The lowest line was never touched since it gapped back up.
Yes, you can also draw lines with downward slants. I don't have any examples right now, but I will look around for a good example and post it. |
