An ascending channel is not your friendly neighborhood psychic’s connection to outlandish ghosts and ghouls. Bet you don’t want to wake up and see them standing by your bed at three in the morning! (Sorry, hope we didn’t give you insomnia.)
Turning to finance: sometimes a stock can move dramatically in a single day. Big news is released and people either buy shares in droves or dump them as fast as they can. in these cases, the stock chart can look like the Cliffs of Dover...flat, then a sudden move up or down
.
Most of the time, though, stocks just bounce around day to day. General market conditions and random buying or selling spurts can cause single-session blips. But within these uneven courses, stocks tend to have an overall direction (even if that direction is sideways).
Over time, longer-term trends emerge, with a stock edging its way higher, lower or sideways. Spotting these trends involves a process called technical analysis. Basically, people and/or computers look at a stock chart and see if there are any trends.
One simple technique is to draw lines connecting the high points and low points of recent trading to form a channel. Basically, once the lines are drawn, it will look like the stock chart is bouncing around inside a tunnel. Now, it is just a matter of seeing which way that channel is pointing. If the channel is moving steadily upward, it's called an "ascending channel." If it is going down, it’s a "descending channel."
If an ascending channel is present, we will see a consistent pattern in which two parallel lines move from lower left to upper right, suggesting an upward direction in price. The lows are higher over time, and the highs are higher too.
The ascending channel is a bullish sign in that it indicates that prices are rising...and rising...and rising. (As opposed to a descending channel, which shows a bearing pattern of prices going lower...and lower...and lower). Your goal in trading an ascending channel would be to buy on a downtick in hopes that the stock continues in an ascending pattern.
Related or Semi-related Video
Finance: What is a Chartist?26 Views
Finance allah shmoop What is a chartist Well here's a
chart and here's a chart and here's a chart All
right Well these are pages from the investing bible of
a chartist A chartist is an investor really a traitor
as they tend to own stocks for a much shorter
period of time than a longer term Really invest or
type person a chartist relies solely on the patterns The
pattern's right there These are all patterns imputed by the
charts that they you know sitting poor threw for hours
and hours So check out this chart see how the
plotted data closely follows the characteristic line there The characteristic
line basically is plodded through all those dots Yes So
they're going to stare at that try to figure out
where that line is going in the future right Get
the crystal ball or all right Well let's look at
this one where the data forms what looks like Well
the head and shoulders of someone who you know doesn't
have a neck that's Just common pattern in trading And
you know if you stopped looking at it and two
thirds of the way through there it's heading down Well
Maybe you'd be short the stock for a few days
and then you see it bottoming and then you'd be
long and try to make money that way Good luck
All right len look at this chart Where is right
here where the data appears to We'll break away from
the established pattern which was all just kind of boring
Lee along down here And then suddenly everything goes up
Yeah start doing its own thing Well maybe the company
reported a good quarter or ah you know the government
cut taxes again Everything went up So these were the
tools of the chartist The chart's a chartist is the
opposite of a fundamental investor meaning that she doesn't know
or care what the company does for a living Really
she doesn't care about their p e ratio nor their
profit margins nor their debt levels on their balance sheet
nor much of anything fundamental about how their business runs
Chartist just care about the pattern they glean from the
charts and all the charts always work until they don't
And what happens when the meteor hits that is that 00:02:06.0 --> [endTime] predictable on a chart Ah
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