Know Where You’re Headed
Using world events and estimations of supply and demand to guide your investment decisions is called fundamental analysis, and it is the favorite evaluation method of those that are involved in trading commodities. However, those that are more interested in short term profits from their stocks use technical analysis tools like the price channel to help them predict the way a stock is going to behave in the future..
Technical analysts rely on stock chart patterns because they provide reliable clues about what is likely to happen next in the market. The price channel will be a common continuation pattern that can slope positively and negatively, and is always restricted by both an upper and lower trend line. The upper and lower trend line marks the lines of resistance and support for the current stock prices. .
The channel is a continuation pattern that slopes up or down and is bound by a trend line on either side. When the trend is upward, it is called a bullish channel and when it slopes downward it is called a bearish channel. A trend change is coming when prices fail to reach channel line support. When you’ve noticed a bullish price channel forming, it might be a good indication that the time is approaching when prices will reach main trend line support, encouraging traders to buy. Conversely, when you’ve noticed that prices of a bearish price channel have reached main trend line resistance, traders usually take this as a sign to sell.