Breakouts: Traders could buy a stock when its price breaks above the upper channel line of an . It is prudent to use other technical indicators to confirm the breakout. For example, traders could require that a significant increase in accompanies the breakout and that there is no overhead resistance on higher time frame charts
Breakdowns: Before traders take a short position when price breaks below the lower channel line of an , they should look for other signs that show weakness in the pattern. Price failing to reach the upper frequently is one such warning sign. Traders should also look for negative divergence between a popular indicator, such as the ( ), and price. For instance, if a stock’s price is making higher highs within the , but the indicator is making lower highs, this suggests upward momentum is waning.
Disclaimer: All charts are purely for educational and information purpose only. Invest or Trade at your own risk.