What is an ascending channel?

An ascending channel is the price action contained between upward sloping parallel lines. Higher highs and higher lows characterize this price pattern. Technical analysts construct an ascending channel by drawing a lower trend line that connects the swing lows, and an upper channel line that joins the swing highs.

What does a breakout from an ascending channel mean?

An upside breakout from an ascending channel indicates a higher intensity of buying, and is a technical buy signal. A downside breakout from an ascending channel indicates lower prices to come, and is a technical sell signal. This stock formed a rising channel or ascending channel marked by two parallel uptrend lines .

What is a channel in technical analysis?

Channels are used commonly in technical analysis to confirm trends and identify breakouts and reversals. Within an ascending channel, price does not always remain entirely contained within the pattern’s parallel lines but instead shows areas of support and resistance that traders can use to set stop-loss orders and profit targets.

How do you trade an ascending channel?

Trading an ascending channel in the most effective way is through buying dips to the lower trend line for short-term bounce plays, or by waiting for a downside breakout to occur before short selling.