Not all trendlines support or resist price. Some actually do both at the same time. I call these marvels of technical analysis "psychotic" trendlines, because they behave in a manner that will drive you crazy. But traders can still learn to interpret these lines and have another valuable tool at their disposal.

Technical Analysis 101 teaches that trendlines represent support or resistance levels where price should pause, or reverse. Their construction is simple enough. Find three or more highs or lows in a row, connect the dots, and extend out the lines for buying and selling decisions. But sometimes price action around trendlines can get just plain weird.

Traders need innovative ways to evaluate new setups. Psychotic trendlines give them another method to accomplish this difficult task. Charts hide many odd shapes that impact price action. It's this less-traveled path that may produce a trading edge that lasts a lifetime.

What exactly are psychotic trendlines? The most common variety can be seen in a simple trendline or channel that vanishes from a price chart, only to reappear months or years later.

Furthermore, these phantoms show up exactly where you'd expect them if you had extended out their original pathways. Once they reappear, they resume all the normal dynamics you expect with support and resistance.

At first glance, these hide-and-seek lines just add to the burden of making sound price predictions. But they have considerable value because many traders never see them. That means you can base decisions on hidden support and resistance, thereby avoiding the crowd. This tends to be a highly profitable way to trade.

The second type of psychotic trendline is a lot more frustrating. Normal trendlines can suddenly transform into price pivots rather than support or resistance levels.

For instance, price strikes a trendline and it holds a couple of times, but then breaks through. So far so good. The problem comes when price approaches it from the other side. Support should now be resistance, and vice versa. But price charges back through the line, often without hesitation, trapping traders who used it to initiate pullback entries.

This trendline as a central pivot axis can drive swing traders insane. After all, how can you make valid predictions when price may bounce or cut through support-resistance like butter? Make psychotic trendlines work for you by using the "two-and-go" rule. Expect price to bounce the first and second times it hits the trendline, but to break through on the third try.

The last psychotic trendline isn't so crazy after all. In fact it's just a natural outcome of chart construction. A straight line can be drawn across any two highs or lows, and then extended outward. These simple vendors don't meet the "three or more" requirement of bona fide trendlines, but they do have an effect on support or resistance.

The bottom line is, there are always traders who buy or sell based on these lines. This gives them a small measure of predictive power.

The best way to utilize these two-point extensions is as secondary verification for other types of support or resistance. For example, one might pass across a major high or low where you expect a reversal. Its appearance raises the odds that support or resistance at that level will hold up.

How else can you apply psychotic trendlines in your trading? First, see if price gaps through one repeatedly or if bars swivel back and forth across its boundaries. This identifies a pivot line. Then determine if the slope is up or down, and whether it acts more as support than resistance, or vice versa.

With this information in hand, trade primarily in the direction of the slope and bias. For example, if the trendline descends and shows price resistance, sell at that line with a tight stop loss.

Psychotic trendlines encompass all straight-line phenomena not covered by classic charting rules. Most trading books limit trendline construction to a set of three (or more) highs or lows. But trendlines can also be drawn through both highs and lows at the same time.

These, in turn, may generate normal or psychotic trendlines. Once again, it goes back to the observation that, if it can be drawn on a price chart, someone will draw it and trade it.