The pattern’s opposite counterpart is the .
An is used in to show an uptrend in a security’s price.
It is formed from two positive sloping drawn above and below a price series depicting resistance and support levels, respectively.
Channels are used commonly in to confirm trends and identify breakouts and reversals.
Support is a price level where a downtrend can be expected to pause due to a concentration of demand. As the price of assets or securities drops, demand for the shares increases, thus forming the support line. Meanwhile, resistance zones arise due to a sell-off when prices increase.
Once an area or "zone" of support or resistance has been identified, it provides valuable potential trade entry or exit points. This is because, as a price reaches a point of support or resistance, it will do one of two things—bounce back away from the support or , or violate the price level and continue in its direction—until it hits the next support or .
Most forms of trades are based on the belief that zones will not be broken. Whether the price is halted by the support or , or it breaks through, traders can "bet" on the direction and can quickly determine if they are correct. If the price moves in the wrong direction, the position can be closed at a small loss. If the price moves in the right direction, however, the move may be substantial.
Technical analysts use levels to identify price points on a chart where the probabilities favor a pause, or reversal, of a prevailing trend.
Support occurs where a downtrend is expected to pause, due to a concentration of demand.
Resistance occurs where an uptrend is expected to pause temporarily, due to a concentration of supply.
Market psychology plays a major role as traders and investors remember the past and react to changing conditions to anticipate future market movement.