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Two parallel trendlines that contain price action. Channels define the boundaries of a trend and offer high-probability trading opportunities at support and resistance.
A Channel is a chart pattern formed by two parallel trendlines that contain price movement. The upper line acts as resistance while the lower line acts as support. Price oscillates between these boundaries.
Channels are among the most reliable and tradeable patterns because they define clear boundaries for trend movement. They can be ascending (bullish), descending (bearish), or horizontal (ranging).
Channels represent organized trending behavior. Unlike chaotic price action, channels show that buyers and sellers have established a predictable rhythm. The market has agreed on boundaries.
In an ascending channel, buyers consistently step in at support while sellers take profits at resistance. Both sides are *cooperating* to maintain the channel - buyers get dips, sellers get rallies, and the trend continues.
Channel breaks are significant because they represent a change in this agreement. A break above resistance means buyers are now willing to pay more than before. A break below support means sellers have overwhelmed the buyers. The longer and more defined the channel, the more significant the break.
Within channel: Buy at support line, sell at resistance line. Breakout: Enter on confirmed break with volume.
Below support line for longs, above resistance line for shorts. Allow some buffer for wicks.
Within channel: Opposite boundary. Breakout: Channel width projected from break point.
Often 1:2 to 1:3 within channels due to clear boundaries.
Always confirm this pattern with volume analysis and higher timeframe context. A pattern in isolation is just a shape - confluence with other factors is what creates high-probability setups.
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