Tutorial on Channel Chart Pattern
What is Channel Chart Pattern?
Channel Chart pattern is a type of technical analysis in which the price movement is contained between the two parallel trendline and it is very easy to notice this pattern in real charts.
Channels basically works on support and resistance. It consist of following parts:
1.Upper Trendline: It serves as a resistance in the pattern. It is a straight line and atleast have 2 points, the more the better. When the price touches the upper trendline, it can be used as a selling signal.
2.Lower Trendline: It is also a straight line and have atleast 2 points, the more the better. It serves as a support in the pattern. When the price touches the lower trendline, it can be used as a buying signal.
For a channel pattern to be reliable and valid it is extremely important that a. Both the upper and the bottom trendline should be parallel to each other.
b. There should be a proper visible gap between the two lines.
c. there should be atleast 2 peaks in both the lines, more the best.
There are three types of channel pattern. They are:
1. Ascending Channel
2. Descending Channel
3. Rectangle Channel