Trend Channels Partner Center Find a Broker If we take this trend line theory one step further and draw a parallel line at the same angle of the uptrend or downtrend, we will have created a channel.
Trend channels are just another tool in technical analysis which can be used to determine good places to buy or sell. The upper trend line marks resistance and the lower trend line marks support.
So both the tops and bottoms of channels represent potential areas of support or resistance. Trend channels with a negative slope down are considered bearish and those with a positive slope up are considered bullish. To create an up ascending channel, simply draw a parallel line at the same angle as an uptrend line and then move that line to position where it touches the most recent peak.
This should be done at the same time you create the trend line. To create a down descending channel, simply draw a parallel line at the same angle as the downtrend line and then move that line to a position where it touches the most recent valley. Most likely, Millenials.
Important things to remember about drawing trend channels: When constructing a trend channel, both trend lines must be parallel to each other. When this happens, this chart pattern is no longer a trend channel but a triangle.
A common mistake many traders make is that they only look for textbook price patterns. They miss important information about price action and close their eyes to other important clues. Notice the channel drawings below… Do strategy trending channels look perfect?