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Chart Analysis

Trend channels

Use a normal high, low, close bar chart. To construct a trend channel begin with the basic trend line, below the price bars in the case of an up trend and above the price bars in the case of a down trend. A parallel line is then drawn on the other side of the price bars, so that the price action is completely within the channel. In the case of an up trend channel the high side of the channel is drawn across the tops, while in the case of a down trend channel the low side of the channel is drawn across the bottoms.
uptrend channel
The trend channel can be used as a target indicator, as well as providing a general sense of direction and a projected range for new price action.

In the case of a trending market, it is sometimes difficult to find support and resistance, especially if the market is at a new high or low. Once the price reaches the upside of a trend channel, in the case of a bull market, it is a fair indication of a potential top, an end to that particular move. One could expect the market to move towards the other side of the channel as a result.

downtrend channel

If the price moves outside the trend channel, there is a high probability that the market will continue in that direction. We can use the width of the previous trend channel as a target projection point for such a move. The broken trend line can be used as support or resistance in the case of a retracement.

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