The Geometric Pattern family contains patterns formed by combinations of price action movement in relation to one or more trendlines.
The Channel is a widely-used Geometric pattern. It is formed by two parallel trendlines where the price action is contained within the bounds of the two lines.
Ascending Channel
In an ascending Channel, the price action oscillates between the upper and lower lines. Depending on the location of the price, a trader can draw different conclusions on the movement. A breakout from the upper line of an ascending channel can act as a confirmation on the upwards trend of the price. Conversely, a breakout from the lower line of an ascending channel could signify the end of an upwards trend, and indicate a potential trend change.
Descending Channel
In a descending Channel, the price action oscillates between the upper and lower lines following a downwards path. A breakout from the lower line of an ascending channel can indicate a strengthening of the downtrend. A breakout from the upper line of a descending channel can act as an indication of a potential change in the overall price direction, and an end of the down trend.
Channel Patterns with PatternSurfer
With PatternSurfer, ascending and descending Channel structures are automatically identified, as well as information such as the Location of the price (at upper or lower trendlines).
Further, in PatternSurfer, structures where the price is “Approaching” the upper or lower lines of a Channel are identified in advance before the breakout occurs.