What is a Bearish Resistance Line?

March 30, 2015 by Thomas Mullooly

During this video, Tom describes the bearish resistance line. The bearish resistance line is similar to the bullish support line, which Brendan explained recently here: https://mullooly.net/what-is-a-bullish-support-line/8037

Bearish resistance lines are the exact opposite of bullish support lines. When a security is trading below its bearish resistance line, it’s said to be in a negative trend. This means the security’s price has generally been trending downwards. Not very good. We’ve written before about how bad things tend to happen in negative trends.

How is the bearish resistance line determined?

When a security is in a positive trend, it will form a base above its bullish support line. When it gives its first sell signal, we find the tallest column of X’s and draw a line downwards at a 135 degree angle.

Why are bearish resistance lines important?

Our friends at Dorsey Wright and Associates always explain that support and resistance lines tend to act like brick walls. It’s not uncommon to see a security bounce right off its bearish resistance line while remaining in a negative trend. When a security breaks through its bearish resistance line into a positive trend, that’s certainly a noteworthy event.

Watch the video above to see Tom explain what a bearish resistance line is.

About Thomas Mullooly

Thomas Mullooly is owner and founder of Mullooly Asset Management, Inc. In 2002 Tom opened Mullooly Asset Management, a fee-only investment advisory firm. As an investment advisor, and not a broker, Tom works strictly for his clients. With the help of point and figure charting, Tom builds a realistic game plan for clients.