A trading chart rule-based trendline is called a support line since you anticipate that the line will support the price, meaning investors will not allow the price to plunge below it. To create a support line, you begin at the lowest low and draw a line to the next low. This generates a line that can be extended at the same slope. However, it only becomes a trendline when another price low hits the line and bounces off it. This touch-bounce is a confirmation that it is a true trendline.
The rule states that you should buy on the third touch of the trendline by the low of a price bar, and then sell when the low of a price bar plunges below the support line.
The support line is used to identify an uptrend. This provides comfort that the purchase of the asset is returning a profit and may consistently return profits.
There are some instances wherein a support line may experience a breakout or a false breakout.
A breakout may occur when any part of the bar crashes through the line on the downside. When this happens, the support has been broken and you may assume that the trend is over. Yet, this trend end may or may not be real.
Sometimes, the low extends beyond the trendline for just a single day, and then the prices fall back into line. When only a one-day break of the support line occurs, it is called a false breakout.