Posted in Finance, Accounting and Economics Terms, Total Reads: 437
Definition: Horizontal Channel
The two horizontal parallel lines that connect all pivotal highs and pivotal lows that show the progress of the price. The two lines are price range of sideways trend of the securities. The two lines form a rectangle along with the axes. The prices are in the prevailing range due to similar buying and selling pressures. The more contact points the lines have with the prices, the more it will sustain and the movement outside the range will be substantial buy/sell signal.
When the prices move out of the range given by two lines, it shows an advantage to buyer or seller. When the prices go above the top border, it is a buy signal and when the price goes below the bottom border, it is a sell signal.
The top border is also called as resistance line and the bottom border is support line. They show a visual representation of price action. The longer horizontal channel often is often followed by stronger breakout.