“Speed resistance lines” are an analytical tool in technical analysis that is used for determining potential areas of support and resistance. Developed by Edson Gould, a prominent market technician who was famous for his market calls in the 60s and 70s, this tool are trendlines based on Fibonacci retracement points (38.2%, 50.0%, 61.8%, etc.).
Speed resistance lines, consisting of three or more trend lines, is created by drawing the first trend line from the most recent low to the most recent high when the price action is in an uptrend, and from the most recent high to the most recent low when it is in a downtrend. Then the other trendlines will be drawn based on the Fibonacci ratios on the both sides of the first line from the original point.
In practice, let’s take the EUR/USD daily price action for example, which can be in an uptrend or a downtrend:
1. In an uptrend
Speed resistance lines mark three potential support levels to watch, indicated by the orange circles. A breakout below the middle line targets a move towards the first support level (0.618), and then it rallies after touching it. A break below the lower line (0.382) indicates enough weakness to consider a trend reversal.
Once broken, the line extensions can then mark resistance, just as ordinary trend lines, like what it has showed by the blue circles below.
2. In a downtrend
Speed resistance lines mark a few support and resistance levels, depicted by orange and blue respectively. The role of the lines is functioning the same as they do in an uptrend. A break above the upper line indicates a trend reversal. Once broken, these speedlines can then become support on a pullback.