Reviewed by Aug 27, 2020| Updated on
What is a Horizontal Line?
A horizontal line is often drawn, in technical analysis, on a price chart to illustrate areas of support or resistance. A horizontal line of geometrical analysis continues parallel to the x-axis. Put another way, all values on the line on a completely horizontal line will have the same y-value.
Understanding Horizontal Line
For technical analysis, horizontal lines are, generally, used to highlight areas of support where the price stopped falling and then bounced back in previous occasions or resistance, which is where the price stopped rising and then fell in previous occasions. The horizontal line is drawn by connecting similar price swing lows to create a horizontal support line.
The horizontal line is used for analytical or commercial purposes. For example, if an asset's price moves between horizontal lines of support and resistance, then the price is called range-bound. A drop below the horizontal line of support might imply a further fall in prices, but if the support holds and the market bounces higher, then prices might be forthcoming.
The same concepts refer to a horizontal line of resistance. If the price moves beyond resistance, there could be higher prices to come. If the price reaches resistance and then starts to fall, it has kept the horizontal line, and traders should watch for lower prices.
A horizontal line on any map is, in more simple terms, where the y-axis values are equal. If a sequence of peaks in the data has been drawn, a data point rising above the horizontal line will imply an increase in the value of the y-axis over recent data sample values.
A horizontal line is not an actual barrier for price. It is a technical tool which may help traders determine whether they should be more bearish or bullish.