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A thread on how to Define correct Swing Highs / Lows for the purpose of Dow Theory analysis or drawing Trendlines:

Thomas DeMark in his book "The New Science of Technical Analysis" said that drawing
of trend lines is a highly arbitrary process. 1/n
A trend line is typically intended to connect
several Relative Highs or Relative lows. If there are two or more such points, the trend line can be drawn
precisely. (notes from Jack Schwager's book "The Complete Guide to the Futures Market").. 2/n
Relative high is a High that is higher than high on the N prior & N succeeding bars.
where N is a number of bars (can be anything as per individual's setup 5 / 10 / 20...)

if N = 5, Relative High is Current High > last 5 days & succeeding 5 days. Viceversa for Relative Low.. 3/n
Example when N=5...
See how the correct Relative Highs and Lows are marked...

see the prior 5 highs vs Relative High and succeeding 5 highs.. and same for lows (prior 5 lows and next 5 lows) .. 4n
When N=5 is observed in different timeframe... Monthly, weekly and Daily.. (refer chart)

There is no rule of using N=5, one can use any number..
but using atleast a number is important to bring objectivity in analysis.
Chart 2 shows the difference between N=5 and N=10... 5n
Here are the formula for Metastock users:

When Swings are clearly marked on chart.. its easier to identify "important" support and resistance levels

Realtime example of TRENDLINE based on RH and RLs:
#Nifty India Consumption Index

Its time for "C"s to show strength
Updated charts of

Correct TRENDLINE helps..

#Nifty India Consumption Index

"C"s showed strength
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