Can Trendlines on the VIX Chart Predict a Bounce?

Trendlines are subjective by nature. Two traders can draw different lines on the same chart and each can claim the VIX bounced off their line.

So to test the idea properly, we must remove discretion entirely. We created three objective rules:

1. Horizontal support from prior lows
2. A sloped regression channel
3. A downtrend line break.

We backtested all three across 22 years of data.

First, the thing nobody mentions: VIX bounces almost all the time

Within the next...	VIX bounced 10%+	Bounced 25%+	Median VIX gain
10 trading days	66%	30%	+15%
20 trading days	77%	46%	+23%

Read that before you draw a single line. On a randomly chosen day, with no setup at all, VIX rises at least 10% within the next month 77% of the time, and at least 25% 46% of the time. VIX is the most mean-reverting, jumpiest number in markets. It is almost always about to pop by some amount. So a "bounce" is not a rare event you need a line to find. It is the default. Any line you draw will sit just under a bounce that was already coming, and will look, in hindsight, like it called it.

The support line: looks like an edge, but it is just VIX being low

Here is the classic version: a horizontal support at a level VIX has bounced from before. When VIX drifts back down to a prior low, do we get a better bounce than usual?

Next 20 days	Bounced 10%+	Bounced 25%+	Median VIX gain
Any random day (baseline)	77%	46%	+23%
At horizontal support	81%	50%	+25%
Any day at the same low VIX (~15)	80%	53%	+27%

At support, VIX bounces a little more than the overall baseline, 81% versus 77%. That is the number people point to when they say the line works. But look at the third row. Support touches only happen when VIX is already low, around 15 against an average of 16.6, and low VIX mean-reverts upward harder no matter what. Compare the support touches to a random day at the same low VIX, and the bounce is just as big, in fact a touch bigger (80%, and 53% for the larger move). The support line adds nothing. The only thing predicting the bounce is that VIX is low, and you can read that straight off the number without drawing anything.

The sloped line and the breakout trend lines are actually worse

Maybe the horizontal line is too crude, and a proper sloped trendline does better. It does not. We created a mechanical trend channel and flagged the days VIX touched its lower band ("price hit the rising support line"). Those days bounced 10%+ in the next month 73% of the time, below the 77% baseline.

And the textbook breakout play, VIX breaking up through a descending trendline while in a downtrend, the "it is finally turning, ride it" setup, did even worse: it bounced less than a random day.