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Unlock Your Stock Profits with Trend Channels!

The stock market can be a tricky and volatile place, full of upswings and downturns. While movements in the stock market can often be random, professionals have managed to identify several patterns in stock prices that indicate a potential pullback scenario. Among these patterns are trend channels. Trend channels are charting patterns in which a stock’s price action forms a parallel channel that has both and upper and lower limit. When these limits are breached, it may be a sign that a stock is due for a pullback. In order to create a trend channel, stock analysts will look for at least two parallel pivot high points (where the stock reverses direction after selling) and two parallel pivot low points (when the stock turns back up after buying). Once these points are identified, they are connected with a line on a chart, creating a channel if the second points fall in line with the first points. When a stock price moves outside of the boundaries of the trend channel, it may be a warning sign that the stock is due for a pullback. If this happens, investors need to decide if they should buy more of the stock (powering through the pullback) or if it is best to prepared for the possibility of a further drop. Some investors take this approach a step further and will look for a second trend channel that might for between the two points of the first trend channel. This double channel approach gives analysts a better view of the range in which a stock’s price can stay before a pullback occurs. Identifying pullback scenarios is a useful tool for traders and investors to capitalize on in the stock market. Trend channels can provide helpful insight into when pullbacks may occur and when to prepare for a stock’s price to drop. By keeping an eye on charting patterns, investors can use this information to make more informed choices in the stock market.