Let PAX decide

I am often asked how do I draw the lines. For one to determine the risk and the reward of a certain stock, he/she must first know how to draw the resistance (reward) and support (risk) lines.

Two basic rules to remember in drawing the lines:
1) Resistance line connects the highs
2) Support line connects the lows

To show some illustration, I'll be using PAX chart for our study. In our chart, I draw the topmost resistance line by connecting the high of April 18, 2007 and June 15, 2007 (see red arrow1 and red arrow 2) and extend it to the right. Notice that the resistance line had held down the price last June 25, 2007 when it tried to rally. It's a clue that the resistance line is so strong that after failing to break the resistance line, prices had plummetted to a low of 2.95 in February 14, 2008 and keeps holding it down till yesterday's trading.

Let's now draw our support line. Let's connect the low of April 28, 2008 and August 22, 2008 (green arrow 1 and green arrow 2) and extend it to the right.

Now here's something exciting on PAX. Notice that price will be crossing the resistance line. My estimate is in 12-14 trading days (just estimating the spaces of the candlesticks). What will PAX do? At the point of crossing, Let PAX decide.