By this stage in my process, the work has somewhat resolved itself. I used AI to screen for stocks that are fundamentally strong and technically promising. In the second step, I expanded that list by ensuring that the industry surrounding each stock was actually demonstrating strength. I end up with a short list of 3-4 high-conviction stocks that warrant serious consideration.
This is the point at which the chart becomes relevant. And the very first thing I do, before anything else, is draw a trendline.
Why I Start on the Daily Chart
I open my trading app and pull up the stock’s price chart. The first setting I check is the timeframe, and I always start on the daily chart.
This is no small detail. I’m going to hold a position for a meaningful stretch of time—weeks, sometimes months. I need a time frame that reflects that horizon. If you are a position trader, then a 15-minute or hourly chart is just a lot of meaningless noise. It is intended for individuals who engage in same-day trading.
That said, the daily chart isn’t the only one I ever look at. I may zoom out to a weekly chart to gain a broader perspective or switch to a shorter timeframe for precision just before entering a trade. But the analysis always starts on the daily chart. That’s my anchor.
| Timeframe | When I Use It | What It Tells Me |
| Weekly | Occasionally, for context | The bigger trend and major support/resistance zones |
| Daily | Always, my starting point | Whether a stock is building a genuine, tradable structure |
| Intraday (15-min/hourly) | Only near actual entry | Fine-tuning the exact entry point once the daily setup confirms |
What Is a Trendline?
A trendline is one of the simplest tools in technical analysis and one of the most misunderstood. A trend line is a straight line that connects a series of price points and shows the direction and speed of a trend.
- In a downtrend, I draw the line by connecting the lower highs, the sequence of peaks that continue to fail at a lower point each time.
- In an uptrend, the same idea works in reverse; you connect the higher lows, the rising floor beneath the price.
A downward trendline acts like a ceiling. Every time the price rallies and touches that line, sellers step back in and push it down again. That ceiling stays valid right up until the moment the price finally breaks through it, and that break is one of the most important signals in my entire process.
Drawing the Trendline: A Real Example
Here’s an actual chart I used at this stage of my process, on Maruti’s daily timeframe.
By this point Maruti’s price was in a correction, falling and forming a clear pattern of lower highs. I take those recent lower highs and connect them with one line to create the trend line. I then extend the trend line forward across the chart.
The logic is simple: as long as the price continues to respect that line, hitting it and reversing back down, the downtrend is still intact, and I stay out of the trade. The moment that price closes above that trendline, it tells me that something has shifted in the balance between buyers and sellers.
What I Watch For Immediately After Drawing It
Once the trendline is on the chart, I don’t have to do anything fancy. There’s one question I’m watching for an answer to:
Has the price moved above the trendline?
That’s it. I’m not predicting when the event will happen or forcing a trade around it. I simply mark the line and wait. If the price stays below it, the stock stays on my watchlist untouched. If the price closes above it, I proceed to the next stage of my process: verifying the authenticity of the move above the trendline, which involves analyzing volume.
Quick Reference: Reading a Downward Trendline
| Signal | What It Means | My Action |
| Price touches the trendline and reverses down | Downtrend still intact | Wait, no action |
| Price approaches the trendline but hasn’t closed above it | The setup is still forming | Watch closely; no action yet |
| The price closes clearly above the trendline | Possible trend change | Move to volume confirmation |
| Price breaks below recent lows instead | Setup has failed | Remove from watchlist |
Final Thoughts
Drawing the trendline and waiting for a break above is only part of the process. A price breakout on its own can be deceptive; there are plenty of false breakouts on thin, unconvincing volume. In the next article of this series, I will cover in the next step how I use volume to confirm if a trendline breakout is real and what I need to see before I take it seriously.
For now, if you’re building your own process, don’t skip the trendline. It’s a simple line, but it’s the first honest signal the chart gives you about whether a stock is still falling or about to turn.
Find out here: Trendline Breakout With Volume: Why I Never Trust One Without the Other
Disclaimer: This column reflects the author’s personal trading experience and analysis. It is not financial advice. Please consult a registered advisor before making any investment decisions.
Satyajit Baidya
An option writer who came to the markets through curiosity and stayed through conviction. He studies price action through the lens of Elliott Wave theory and draws his trading philosophy from Jesse Livermore—the belief that discipline, timing, and patience matter more than predictions do. A student of history by training, he sees the market as just another chapter in a very long story: the details change, the patterns don’t.
