Descending Price Channels within Long-term Price Uptrends
A descending channel or “descending channel pattern” represents a price downtrend that is illustrated between two downward-sloping trend lines. While descending channel patterns are bearish, they often form within longer-term upward trends. Many traders look for short-term descending channels within uptrends as good entry points in anticipation of price breaks to the upside. When this happens, the pattern is frequently followed by higher prices.
Other traders, when observing price channels many technical analysts follow the rule that price will continue on the “path of least resistance” until a trend line is broken. Until that time, the stock’s price is controlled by resistance on the upper trend line and support on the lower trend line. The belief by these traders is that the best way to trade a descending channel is by waiting for an upside breakout before entering.
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The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax advisor.
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