{"id":2583,"date":"2019-08-27T17:37:00","date_gmt":"2019-08-27T17:37:00","guid":{"rendered":"https:\/\/analystprep.com\/cfa-level-1-exam\/?p=2583"},"modified":"2026-03-26T16:23:10","modified_gmt":"2026-03-26T16:23:10","slug":"trend-support-resistance-lines-change-polarity","status":"publish","type":"post","link":"https:\/\/analystprep.com\/cfa-level-1-exam\/portfolio-management\/trend-support-resistance-lines-change-polarity\/","title":{"rendered":"Trend, Support, Resistance Lines and Change in Polarity"},"content":{"rendered":"\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"VideoObject\",\n  \"name\": \"Technical Analysis (2023 Level I CFA\u00ae Exam \u2013 PM \u2013 Module 7)\",\n  \"description\": \"This video lesson covers the foundations of technical analysis, including its core principles, chart types, and common indicators. It compares technical with fundamental analysis, explores behavioral finance links, and explains trendlines, support\/resistance, and chart patterns. The lesson concludes with intermarket analysis and how technical tools apply to portfolio management.\",\n  \"uploadDate\": \"2021-12-27T00:00:00+00:00\",\n  \"thumbnailUrl\": \"https:\/\/i.ytimg.com\/vi\/aIFkX46UShE\/hqdefault.jpg\",\n  \"contentUrl\": \"https:\/\/www.youtube.com\/watch?v=aIFkX46UShE\",\n  \"embedUrl\": \"https:\/\/www.youtube.com\/embed\/aIFkX46UShE\",\n  \"duration\": \"PT59M32S\"\n}\n<\/script>\n\n\n\n<iframe loading=\"lazy\" width=\"560\" height=\"315\" src=\"https:\/\/www.youtube.com\/embed\/aIFkX46UShE?si=HgXTKGBkwnt9gdJX\" title=\"YouTube video player\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe>\n\n\n<h2><strong>Trend<\/strong><\/h2>\n<p>Trend is perhaps one of the most important concepts in technical analysis. Under normal circumstances, market participants tend to make similar decisions and a trend may persist for some time. The following are a few additional concepts that every CFA level I candidate is expected to understand before sitting the exam.<\/p>\n<p><!--more--><\/p>\n<h3><strong>The Two Aspects of Trend<\/strong><\/h3>\n<p>We say a market is in an <strong>uptrend<\/strong> when the price consistently goes to higher highs and higher lows. As the price of a security increases, the subsequent new high attained is higher than the one preceding it. Similarly, each time the price retraces, the new low attained must be \u2018higher\u2019 than the one that comes before it. Behind an uptrend lies demand that is higher than supply. Therefore, market participants are willing to pay higher and higher prices as they scramble for the same asset. Such a scenario may happen over a period of time.<\/p>\n<p>Experts say that the market is in a <strong>downward trend<\/strong> when an asset consistently makes lower lows and lower highs. As the price of a security decreases, the subsequent new high must be lower than the preceding high. Similarly, each time the price retraces, the new low must be lower than the low preceding it in the trend period. Behind a downtrend lies supply that is overwhelming demand. Therefore, market participants are willing to exit long positions and accept declining prices.<\/p>\n<h2><strong>Support and Resistance<\/strong><\/h2>\n<p>Support refers to a low price range in which further decline in price can be averted by some buying activity. It\u2019s the direct opposite of resistance, which is a price range in which further increase in price can be averted by some selling activity. In addition to trend, support and resistance are linked to human psychology, particularly the tendency of buyers and sellers to find common ground on the price of a security.<\/p>\n<h2><strong>Change in Polarity<\/strong><\/h2>\n<p>The change in polarity principle asserts that once breached, a support level becomes a resistance level. Similarly, resistance levels become support levels upon a breach. For instance, assume the price of a certain security never rises beyond $15 over a long period of time and actually begins to decline whenever it reaches this level. If the price finally \u201cbreaks\u201d the $15 ceiling by a significant amount, the new point to which the price rises effectively becomes a support level.<\/p>\n<p><em>Reading 56 LOS 56c:<\/em><\/p>\n<p><em>Explain uses of trend, support, resistance lines, and change in polarity.<\/em><\/p>\n<div class=\"notes_inv\"><hr \/>\n<p><em><a href=\"https:\/\/analystprep.com\/cfa-level-1-exam\/portfolio-management\/learning-sessions-curriculum-portfolio-management\/\">Portfolio Management \u2013 Learning Sessions<\/a><\/em><\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>Trend Trend is perhaps one of the most important concepts in technical analysis. Under normal circumstances, market participants tend to make similar decisions and a trend may persist for some time. The following are a few additional concepts that every&#8230;<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7],"tags":[],"class_list":["post-2583","post","type-post","status-publish","format-standard","hentry","category-portfolio-management","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Trend, Support &amp; Resistance Lines | CFA Level 1<\/title>\n<meta name=\"description\" content=\"Learn how trendlines, support, and resistance levels help analyze price movements. 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