Speed Resistance Lines

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Overview

Speed Resistance Lines (often shortened to speed lines) are a technical analysis tool that combines trendlines and retracement ratios, also known as the 1/3–2/3 lines. Its core idea is:

After a complete up or down move, support or resistance often appears in the 1/3 to 2/3 retracement zone, and speed lines “draw” these potential support/resistance areas onto the chart in the form of diagonal lines.

Unlike traditional horizontal support/resistance:

• Speed lines are slanted, accounting for price magnitude + the passage of time
• They use three lines to divide a trend leg into three segments, representing different “speed” regimes
• How price behaves around different speed lines can help you judge:
  • whether the current trend is strong, normal, or clearly weakening
  • where pullbacks/rebounds may stall or reverse

You can think of it like this: price is climbing a hillside, and we use three reference “ramps” with different slopes to measure:

• staying above the steepest line → very strong
• dropping to the middle ramp → normal speed but starting to “pant”
• breaking even the gentlest ramp → this climb is likely nearing its end

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The Principle Behind Speed Lines

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How to Construct Them

Speed lines may sound a bit “mystical,” but the steps are very mechanical:

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1. Identify a “complete swing leg”

• Uptrend: pick an obvious low L and a subsequent obvious high H
• Downtrend: pick an obvious high H and a subsequent obvious low L
• The leg must have a clear, relatively independent start and end—don’t pick points casually

Tip: Prefer major swing highs/lows, e.g., the start and end of a clearly visible rally/decline. (chartschool.stockcharts.com)

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2. Calculate the 1/3 and 2/3 price levels

Using an uptrend as an example:

• Swing distance: D = H - L
• 1/3 level price: P₁ = L + D × 1/3
• 2/3 level price: P₂ = L + D × 2/3

Using a downtrend as an example:

• Swing distance: D = H - L
• 1/3 level price: P₁ = H - D × 1/3
• 2/3 level price: P₂ = H - D × 2/3 (chartschool.stockcharts.com)

These two price points roughly correspond to the “1/3 and 2/3 height” of the move from start to finish.

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3. Draw the three speed lines

Speed lines for an uptrend:

1. Baseline (main line): connect low L directly to high H, and extend to the right
2. 2/3 speed line: start from low L, connect to the point priced at P₂ (the 2/3 level), then extend right
3. 1/3 speed line: start from low L, connect to the point priced at P₁ (the 1/3 level), then extend right

Speed lines for a downtrend:

1. Baseline (main line): connect high H directly to low L, and extend to the right
2. 2/3 speed line: start from high H, connect to the point priced at P₂ (the 2/3 level), and extend right
3. 1/3 speed line: start from high H, connect to the point priced at P₁ (the 1/3 level), and extend right (chartschool.stockcharts.com)

Note: These lines often “cut through” historical prices rather than hugging exact highs/lows like traditional trendlines—this is a defining feature.

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4. A simple numerical example (uptrend)

• A stock rises from 10 to 22
• Swing distance: D = 22 - 10 = 12
• 1/3 height: 10 + 12 × 1/3 = 14
• 2/3 height: 10 + 12 × 2/3 = 18

On the chart you get:

• a baseline rising diagonal from 10 → 22
• a 2/3 speed line roughly corresponding to ~18
• a 1/3 speed line roughly corresponding to ~14

As price moves forward in time, the three lines act like “three sloped ramps” for reference.

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Use Cases

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1. Judging trend strength (which “ramp” price is standing on)

Still using an uptrend as an example:

• Price runs along the baseline or above the 2/3 speed line:
  • the trend is very strong; pullbacks are shallow
• Price breaks below the 2/3 line but stabilizes above the 1/3 line:
  • upside momentum clearly slows, but the bigger bias remains bullish
• Price also breaks below the 1/3 speed line decisively:
  • often suggests the uptrend is meaningfully damaged, possibly transitioning into a larger correction or reversal

In a downtrend, the logic flips—the three lines become dynamic overhead resistance, and you interpret break order in the opposite direction. (chartschool.stockcharts.com)

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2. Estimating the “normal depth” of a pullback/rebound

• After a sharp rally, if price pulls back and stabilizes near the 2/3 speed line:
  • it’s generally viewed as a healthy, normal pullback
• If price drops straight to the 1/3 speed line, or probes it repeatedly:
  • bulls are clearly running out of breath; guard against trend weakening or reversal

Likewise in a downtrend:

• rebound rejected near the 2/3 line → normal rebound
• rebound breaks above the 1/3 line → rebound strength is higher; watch for reversal risk

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3. Decision support: stops, targets, and scaling

• Long positions:
  • treat the 2/3 speed line as the first “dynamic stop/reduction warning line”
  • the 1/3 speed line becomes the “last line of defense”
• Short positions:
  • similarly, treat the two lines as tiered profit-taking / risk-control levels

Speed lines are not a mechanical trading system, but they can turn “fuzzy trend changes” into visual line references, making decisions easier. (Investopedia)

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Core Concepts

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1. Where the “1/3–2/3” idea comes from

• Dow Theory contains a classic notion: Corrections often retrace about 1/3 to 2/3 of the prior move.
• Speed lines “draw” this rule of thumb into a diagonal-line structure projected onto the chart. (chartschool.stockcharts.com)

Compared with familiar tools:

• Fibonacci retracements: commonly 38.2%, 61.8%, primarily horizontal
• Speed lines: use the “coarser” 1/3 and 2/3 while incorporating time, expressed as slanted lines

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2. Diagonal support/resistance: includes the “time dimension”

Traditional horizontal support/resistance answers one question:

“At roughly what price might buying/selling show up?”

Speed lines also implicitly answer:

“After how much time, even for the same retracement depth, might the corresponding price be different?”

Because the lines slope:

• on the right side (future), the same line corresponds to higher/lower prices
• this fits reality: the longer a trend persists, the market’s accepted “reasonable price zone” often shifts

A simple intuition:

Horizontal lines are “static defenses”; speed lines are “defenses that move with time.”

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3. Anchor selection is critical

If you choose the start/end points incorrectly:

• the entire set’s slope and placement becomes distorted
• the “support/resistance” you see may be just random noise

Practical experience:

1. Prefer important swing highs/lows (weekly/daily first)
2. If a new higher high/lower low appears later, re-anchor the speed lines to fit the latest structure
3. Don’t force speed lines onto purely sideways, trendless ranges—this is pattern-hunting

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4. Combining with other tools

Speed lines are rarely used in isolation; they work best when:

• overlaid with traditional trendlines, moving averages, and support/resistance
• combined with Fibonacci retracements / price channels / volume-at-price
• when multiple tools overlap in the same zone:
  • the importance of that area increases sharply (worth closer attention)

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Practical Applications

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Case 1: Buying pullbacks in an uptrend

Background:

• A stock rallies from 10 to 22, forming a clear up-leg
• You trade swings and want more reasonable pullback entries

Step 1: Draw speed lines

• Low L = 10, High H = 22
• Distance D = 12
• 1/3 level: 14
• 2/3 level: 18
• Draw the baseline from 10→22, then draw and extend the 1/3 and 2/3 speed lines based on 14 and 18

Step 2: Observe pullback behavior Later price action:

1. Price pulls back from 22 and first approaches the 2/3 speed line:
   • it may pierce intraday, but the close returns above the line
   • volume contracts, and the candle leaves a relatively long lower wick
2. This suggests:
   • bulls are taking some profits, but buying support is still evident near the 2/3 line
   • the uptrend is just normal turnover, not severely damaged

Practical trading idea:

• Probe longs in tranches near the 2/3 speed line
• Place stops a certain distance below the 2/3 line (e.g., 2–3%)
• If price not only breaks 2/3 but even approaches the 1/3 speed line:
  • pause adding, shift to wait-and-see or reduce, to avoid participating in a late-stage trend exhaustion phase

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Case 2: Shorting/reducing on rebounds in a downtrend

Background:

• An index drops from 3000 to 2400, a clear bearish trend
• You already hold some shorts and want good areas to add or take profits

Step 1: Draw speed lines (downtrend)

• High H = 3000, Low L = 2400
• Distance D = 600
• 1/3 level: 3000 - 600 × 1/3 = 2800
• 2/3 level: 3000 - 600 × 2/3 = 2600
• Draw the baseline from 3000→2400, then construct the 1/3 and 2/3 speed lines using 2800 and 2600

Step 2: Observe the rebound near the speed lines

• The index rebounds from 2400 to near the 2/3 speed line (~2600)
• You see:
  • a long upper wick on higher volume
  • continued decline the next day
• This suggests:
  • bears reasserted control near the 2/3 speed line
  • the rebound is a bear-market rally and hasn’t changed the larger bearish structure

Practical idea:

• For existing shorts: take partial profits in tranches near the 2/3 line, keep the remainder with a protective stop near the 1/3 line (~2800)
• For traders without positions: treat this as a potential trend-following short area, but you must confirm with other signals (volume, key horizontal levels, macro news) and manage risk tightly.

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Case 3: “Confluence zones” with traditional support/resistance and moving averages

In real charts you may see a situation like:

• the daily 2/3 speed line
• sitting near:
  • a prior platform high
  • a clear mid/long-term moving average (e.g., the 60-day MA)
  • even an important round number (e.g., 3000)

When price returns to that area:

• If it’s a pullback in an uptrend:
  • this is a classic multi-support confluence zone, a strong area to look for long opportunities
• If it’s a rebound in a downtrend:
  • it becomes a multi-resistance confluence zone, where you should be cautious chasing and may consider reducing/shorting into strength

This “multiple tools pointing to the same area” is far more credible than relying on a single line.

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Common Questions

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Q1: What’s the difference between speed resistance lines and Fibonacci retracements? Can they replace each other?

They’re not simple substitutes—think of them as tools with different perspectives. Key differences:

1. Different ratios
   • Speed lines use the “coarser” 1/3 and 2/3 zones
   • Fibonacci is finer: 38.2%, 50%, 61.8%, etc.
2. Different form
   • Speed lines → diagonal lines, reflecting the joint evolution of “price + time”
   • Fibonacci retracements → horizontal lines, emphasizing static “price height”
3. Different emphasis
   • Speed lines are better for reading the process of trend-speed decay
   • Fibonacci is often used for more precise targets / take-profit levels

A more practical approach:

Use them together: when a speed line overlaps with a key Fibonacci level, that area deserves extra attention.

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Q2: Which timeframe should I use for speed lines—daily, weekly, or 5-minute?

A simple rule:

Match the timeframe to how long you plan to hold.

• For short-to-medium swing trades (days to weeks):
  • prioritize daily speed lines, supplemented by 4H / 60-minute charts
• For long-term allocation / trend investing:
  • draw speed lines on the weekly or even monthly chart to see the big structure
• For high-frequency scalping (minutes):
  • short-term noise is huge and speed lines can distort easily, recommended only for very experienced traders

A practical workflow:

1. Use daily/weekly to pick one or two key swing legs and draw speed lines as your “big map”
2. Then use hourly charts to time entries/stops with moving averages and short-term support/resistance

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Q3: Price often “pokes through” a speed line and then snaps back—does that mean it failed or it was a false break?

This is very common and doesn’t mean the tool is “useless.” Note a few points:

1. Speed lines are zones, not precise cutoffs
   • In practice you’ll see:
     • brief pierces followed by quick reclaims (false breaks)
     • intraday breaks, but the close reclaims the line
   • So don’t treat speed lines as exact buy/sell points “to the second decimal”
2. You need confirmation from other signals
   • volume: is it a real high-volume breakout or a low-volume “fake poke”?
   • candles: long wicks or strong real-body follow-through?
   • broader market: in high-volatility tape, single-line signals get noisy
3. Risk control first—no “stubborn trades”
   • If your pre-defined stop near the speed line is triggered:
     • execute discipline first, not “let’s wait and see”
   • If the market later proves it was a false break, you can re-enter when the setup improves—don’t fight the market emotionally.

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Summary

The essence of speed resistance lines can be distilled into a few points:

1. They use three diagonal lines to split a trend leg into three parts, reflecting different trend speeds and retracement depths
2. The 1/3–2/3 zone is a classic correction zone, and speed lines “geometrize” it onto the chart
3. In an uptrend:
   • holding above the 2/3 line → strong trend
   • breaking 2/3 but holding 1/3 → normal/deeper correction
   • decisively breaking 1/3 → beware a trend turn
4. In a downtrend, the three lines symmetrically act as dynamic overhead resistance
5. Speed lines are not a standalone “holy grail indicator”; they work best with:
   • trendlines and moving averages
   • horizontal support/resistance
   • Fibonacci retracements and volume-at-price to form more convincing confluence zones.

Remember a practical principle:

Treat speed lines as a ruler for understanding trend rhythm and speed, not as a “mechanical buy/sell point generator.”

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Further Reading

• John J. Murphy, Technical Analysis of the Financial Markets The book includes dedicated sections on speed lines, Fibonacci tools, and other trend-analysis methods—one of the classic textbooks for systematic technical analysis study. (Wicked Stocks)
• StockCharts ChartSchool – Speed Resistance Lines An English online resource explaining how to draw speed lines, with examples for uptrends/downtrends and guidance on re-anchoring. (chartschool.stockcharts.com)
• Investopedia – Speed Resistance Lines: What It Means, How It Works Explains what speed lines do and their limitations from a definition-and-usage perspective; useful as supplementary reading. (Investopedia)