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 Technical Analysis?12 Views
Finance a la shmoop what is technical analysis okay we have fundamental [Fundamental analyst sat at a desk]
analysts who look at what the company does for a living how hard its products
are to manufacture how much they sell for how big global demand is how [Fundemental analyst check list]
powerful their brand is what their profit margins are in their growth
prospects from there how their balance sheet looks you know stuff like that
technical analysts don't care at all about any of that stuff those are
fundamental elements of a company technical analyst view stocks only as [Technical analyst chucks the list away]
trading sardines and really couldn't care less how the companies they are [Sardines with company logos on]
trading actually make money or run their businesses technical analysts follow
stock charts with influence from all kinds of shapes made by recent [Examples of shapes on a blackboard]
historical prices on a graph made by these stocks like you have a triple top
here right like so there's a hard line is trying to break out of that line line [Top line is highlighted]
says nook smacking you back down they can't break out so it's triple top and a [Hand smacks the price back down]
lot of gravity there so no maybe I'm short that stock at the end of that
triple top all right then you have the dome yeah it just kind of goes up but it
doesn't really want to break up so it's kind of trading down and then what do I
do with the stock here I don't know I don't know then you have descending tops [End of the dome is highlighted]
where Oh tried to break out oh but now it's a lower low because they miss their
earnings ah now it's a lower low and again they missed so the stocks going [Trend line showing the price going down]
nowhere it's pretty depressing around here then you have a saucer notably
shaped like a smiley face yeah you can see the two eyeballs there so you want [Smiley emoji appears]
to be long that stock somewhere in the middle there because
then it goes up and does better and yeah life's good and color and dimension gets
added to the stock charts via other technical things like volumes of shares [Colorful 3d stock chart]
traded in a given week or day or month if you're having a mini deja vu well it
might be because you just saw our M night Shyamalan dingdong
directed video directly cleverly called what is a Chartist and while they're [Girl working behind a computer]
basically the same thing technical analyst and chart us you know
same foot so yeah fundamental analyst concerned with nuts and bolts of the
operations of a business technical analyst concerned with pretty little [Descriptions of each analyst shown next to them]
drawings of the nuts and bolts reflection on a graph and interpreting
what that all means a kind of like staring at you know animal problems in [Looking at dung through a magnifying glass]
the jungle mental health analyst well I had to get a lot of these guys in their
office sorry different kind of therapy [Both the analysts at a therapist]
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