Channel Lines

Sometimes prices move in a well-defined passage through the main tendency line and other parallel-denominated channel line.

The identification of both lines may constitute valuable information. With this information, the technical analyst knows beforehand the inflection points of the market. The tendency and channel lines are two of he most simple tools that an analyst uses.

Backward motions
In the course of any tendency, the prices can take an unforeseen direction; that is, to undo part of the route traveled for then to take again the first direction. These temporary counter tendencies receive the denomination of backward motions.

Tendency key day
Any day in the market begins a new tendency is potentially a back tendency or ceiling or a purchase or sale climax or a tendency key day.

When can you consider as a key day a tendency of the day?
In an ascendant tendency, a ceiling is the day in which a new maximum is established, if well the market closes lower than the former day. A back tendency, on the contrary, is the day in which in a descending tendency, a new minimum is fixed, but the market closes higher than in the former day. 

In both cases, the volume of contracting is usually large. Also, if the maximum and the minimum of the tendency of the day exceeds on the top and on the bottom from that of the former day, forming what is known as an “extreme day”, the tendency acquires even more weight.

However, in many cases, you cannot identify in a positive way a true tendency key day until, much after, when the prices have moved significantly. Sometimes it takes two days for the tendency to appear. In this case it receives the name of two days tendency.

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