Bar versus Line or Close-Only ChartsSome charts are plotted with bars and others are line charts. The question naturally arises, "Which form should be used for the purposes of trendline analysis?" In most cases, bar charts offer more timely signals, whether the signal is a peak-and-trough progression, price pattern completion, or trend- line violation. In technical analysis, timeliness comes at a price, and the price in this case is more whipsaws. With traditional daily or weekly charts, the closing price is very important because it sorts out the men (i.e., those who are willing to take hom e a position overnight or over a weekend) from the boys (i.e., those who are not). This has become a less important factor in some markets, as they trade for 24 hours Sunday through Friday. (However, since all markets are closed over the weekend, Friday closes continue to maintain their importance.) Even so, closing prices are, for the most part, more important chart point than highs or lows. Also since there is much excitement during the day as unexpected news breaks, highs and lows often represent random points on the chart. For this reason, it is often a better idea to construct trendlines using closing data. I am not going to say that this is always the case because some bar trendlines have greater significance than close- only ones, based on the rules for significance described later in this chapter. Thus, it is always crucial to apply common sense as much a strict technical rules. The question you should be constantly asking is, "Which line better reflects the underlying trend?"
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