What is rising (or) ascending Channel Chart Pattern?
As you can notice the rising channel pattern moves upwards, it is also called as Bullish Channel pattern. It comprises of two lines parallel to each other with points shaping higher highs and higher lows therefore consequential in bullish channel or upside channel. The price is limited between the two trend lines.
It has the following:
How to Identify a Rising Channel chart pattern?
The illustration above has shaped a rising channel pattern in an aluminum daily chart.
What is a Rising Upper Trend line?
The rising upper trend line is also recognized as the channel line or secondary trend line.
This is drawn in parallel to the main trend line. It should have a minimum of two consecutive points forming higher highs.
More strength is indicated when there is more points in the trend line
The main trend line acts as a resistance in ascending channel pattern.
What is a Rising Lower Trend line?
A rising lower trend line is also known as the major trend line or primary trend line. This trend line establishes the trend. It gives out as a support in this pattern. It should have a minimum of two consecutive lower lows point. More points specify more validity.
What is Breakout support line?
The breakout support line can happen in either direction upside or downside.
A Buy signal is indicated when the breakout is in upside direction and further buying activity by the buyers is displayed.
A Sell signal is indicated when the breakout is in downside direction and displays that the uptrend is over and bears have taken over bulls.
What is the Downside Price Target?
When we approximately put a price target after a breakout, which is the height of the channel. This can be termed as downside price target.
What is the duration of the channel pattern to be formed?
Channel pattern Formation takes from a few weeks to many months. The Longer the duration, then it is considered to be more reliable than the short duration one.
What is the strategy to trade the rising Channel?
During a uptrend and downtrend
The market can be entered the by placing a sell order (short entry) on the break of the bottom side of the channel.
False breakouts can be avoided by waiting for the candle to close below the bottom trend line and then entry can be made.
It is important to note the area where price breaks the lower support trend line and where we should place the sell order.
No 1: This is the area where price has broken the lower support trend line
1 -Sell order (short entry)
This is where the stop loss should be placed. This is placed above the top side of the rising channel as mentioned in the illustration.
No 2: Back of the channel
No 3: This denotes between the entry (sell order-1) and take profit point-3 (the same height as the back of the channel number-2)
2 -Stop loss
3 -Take profit
The Profit target
The profit target is calculated by taking the height of the back of the channel and by extends that distance down from the trend line breakout.
The rising channel pattern indicates a likely selling opportunity either after it arrives at resistance trend line an uptrend or during an existing downtrend.
The entry (sell order) is placed if the price breaks below the bottom side of the channel or if the price finds resistance at the lower trend line.
The stop loss is placed above the back of the channel.
The take profit target is calculated by taking the height of the back of the channel and by lengthening that distance down from the entry.
When breakout is in upside direction it signals further buying activity by the buyer control and points out a buy signal
In the following topic we have come across the following information:
A brief on rising or ascending channel pattern
Identification of Rising channel pattern
A rising upper trend line and a rising lower trend line
What is a breakout support line?
The different strategies that can be adopted to trade the rising channel pattern