Neck Line
A neck line is a technical analysis tool used in stock trading to indicate a possible trend reversal. It is formed when the high and low prices of a security form a line that resembles the shape of a neck. The neck line is used to identify a potential trend reversal and is often used in conjunction with other technical indicators.
History of the Neck Line
The neck line was first developed by Charles Dow, the founder of Dow Theory. Dow Theory is a form of technical analysis that is based on the idea that stock prices move in trends. According to Dow Theory, a neck line is formed when the high and low prices of a security form a line that resembles the shape of a neck. This line is used to identify a potential trend reversal.
The neck line is often used in conjunction with other technical indicators such as support and resistance levels, moving averages, and volume. By combining these indicators, traders can gain a better understanding of the direction of the market and make more informed trading decisions.
Table of Comparisons
| Indicator | Description |
|---|---|
| Neck Line | A technical analysis tool used to indicate a possible trend reversal. |
| Support and Resistance Levels | Price levels at which a security has difficulty rising above or falling below. |
| Moving Averages | A technical indicator used to smooth out price action and identify trends. |
| Volume | The number of shares or contracts traded in a given period of time. |
Summary
The neck line is a technical analysis tool used to identify a potential trend reversal. It is formed when the high and low prices of a security form a line that resembles the shape of a neck. The neck line is often used in conjunction with other technical indicators such as support and resistance levels, moving averages, and volume. For more information about the neck line, traders can visit websites such as Investopedia and The Balance.
See Also
- Support and Resistance Levels
- Moving Averages
- Volume
- Trend Lines
- Head and Shoulders Pattern
- Double Top Pattern
- Double Bottom Pattern
- Triple Top Pattern
- Triple Bottom Pattern
- Cup and Handle Pattern
