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A Channel Up pattern shows a clearly defined uptrend and describes the behavior of the price contained between upward sloping parallel lines. Higher highs and higher lows characterize this price pattern. This pattern is created via a lower trendline connecting the swing lows (1, 3, 5), and an upper channel line that joins the swing highs (2, 4, 6).
A breakout above a Channel Up’s resistance line points to a continuation of the growth momentum, while a breakdown below the pattern’s support line can demonstrate a possible trend change.
Traders could go long on the security when the price reaches the support line and exit when the price reaches the resistance line. When it breaks above the resistance line, traders can choose to buy the security. As with all the cases above, traders should look for other signs to confirm the pattern before choosing to short the security when the price breaks below the support line.
The difference between a Channel Up and a Channel Down pattern is the trend they describe: the former characterizes an Uptrend while the latter describes a Downtrend.