From a downtrend-line break to a regression channel

Two clocks on one chart

This case is taught as a sequence with two separate tests. The archive required a relative-yield pre-filter and a separate chart confirmation before a position was taken.

Editorial reading: a downtrend-line break states a falsifiable entry hypothesis. A linear-regression price channel later states the hold-or-kill level, so the same chart stays testable after the first signal.

Yield screen before the chart

Relative-dividend-yield is a pre-filter that compares a stock yield with a broad-market yield before any chart rule is allowed to trigger. The yield screen treated a stock yield at 120 percent of the broad-market yield as the buy-zone threshold for the name under study.

The decline and the line break

After a decline from resistance near 58 to below 44, a drop of almost 25 percent, the chart was examined for a reversal signal.

A trendline is a directional line through successive highs or lows. A close through it is treated as a discrete, testable change in the working structure. On 17 February the price crossed above a downtrend line on volume above 660,000 shares, versus typical daily volume below 100,000.

Volume-expansion is a break accompanied by share turnover far above the name's typical daily activity, used only as confirmation of the line break. Two sessions later the price advanced again on volume above 530,000 shares, treated as added evidence that the decline had reversed.

The recorded purchase

After a short, narrow late-February consolidation, the case recorded a purchase on 4 March at 47.75.

The channel as the second clock

Later price action was framed with a center linear-regression line and parallel lines above and below it, forming a channel that defined the trend. Linear-regression is used here as a fitted centerline through ordered prices over a chosen window, and as the spine of a parallel price-channel rather than as a standalone forecast.

A price-channel is a pair of parallel boundaries around a trend that contain later swings. A close outside a boundary is treated as invalidation of the hold hypothesis. The hold rule was continued higher highs and higher lows inside that channel. A close below 52, beneath the channel floor, was the specified liquidation level.

A second exit rule called for selling into a rally if relative yield fell below the broad-market yield.

What stays falsifiable

Editorial reading: after the purchase, the working hypothesis is no longer the February line break. It is the channel structure plus the yield comparison. Higher highs and higher lows inside the channel keep the hold rule intact. A close below 52 kills that hold rule. A relative yield that falls below the broad-market yield kills the original screen.