LINEAR REGRESSION LINES
Overview
Linear regression is a statistical tool used to predict future values from past values. In the case of security prices, it is commonly used to determine when prices are overextended.
Probably more useful to swing traders than those traders day trading, linear regression lines nonetheless may have their place.The calculation for the linear regression trendline is outside the scope of this article.
Linear regression lines are time-consuming to calculate manually, but most charting software can calculate it automatically. Spreadsheets, such as Microsoft Excel, can also display linear regression lines.
The indicator should not be confused with Linear Regression Lines — which are straight lines fitted to a series of data points.
Actually that is two Linear Regression lines with different numbers of bars and pre-smoothing period. The first uses the last 55 bars (Pre-smoothing period of 3) and the second uses the last 233 bars (Pre-smoothing period of 13).
In the Unilever chart (figure 4.9), we see a rising price level beginning in March with rising volume. This is followed by a price consolidation, confirmed by falling volume. Volume up or downtrend is indicated by linear regression lines over the ...
 See also: Linear Regression, Regression, Trend, Point, Chart
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