You are here

Channels - Technical Analysis

Printer-friendly versionPDF version

A trend channel consists of a section of price bars that are between parallel support and resistance lines. There are three types of channels: the Narrow Sideways Channel, the Inclining Channel, and the Declining Channel.

Narrow Sideways ChannelNarrow Sideways Channel
A Narrow Sideways channel is a formation that features both resistance and support with a sideways movement. Support forms the low price bar, while resistance provides the price ceiling.

To trade a Narrow Sideways channel, place an order to buy on a break up and out of the channel, or sell on a break down and out of the channel.

 

Inclining ChannelInclining Channel
The Inclining channel is a formation with parallel price barriers along both the price ceiling and floor. Unlike the Narrow Sideways channel, the Inclining channel has an increase in both the price ceiling and price floor. The breaking of the bottom trend line on this formation shows a change in trend from bullish to bearish.

To trade an Inclining channel, place an order to sell on the break down and out of the channel.

Declining Channel

Declining Channel
The Declining channel is the exact opposite of the Inclining channel formation. The Declining channel has a decrease in both the price ceiling and price floor. The breaking of the top trend line on this formation shows a change in trend from bearish to bullish.

To trade a Declining channel, place an order to buy on the break up and out of the channel.