The purpose of this Market Call section is to
educate readers in technical analysis patterns and indicators. As with all investment
information, you need to research information and consult your financial advisor before
initiating any strategies that are contained in Market Call.
Also, you must realize that as with all trading strategies,
opinions can change quickly depending on market conditions and developments.
This column tries to present historical examples, potential set
ups, and examples of entry and exit strategies.
Channel Breakout and Basing Patterns.
Channel Breakouts are a popular method of trading stocks. The principal
behind a Channel Breakout is that when a stock trades above the highest
price or below the lowest price in the last N (number of periods) number of
periods, a new trend may be starting to take place.
This channel trading method can be used in any number of periods from
minute bars to weekly time frames.
The results of using such a method will often result in a stock moving
above a defined resistance or support area.
When a stock is in a defined trend, the channel will continue to step up or
down, depending on the trend.
Lets look at Intel Corporation (NASDAQ: INTC).
They say that the strong get stronger and the weak get weaker.
INTC is an example of a strong stock that has minor retracements and then
breaks out of its channel to move higher.
Over the past couple of weeks despite extreme volatility in the markets,
INTC has been trading between 104 and 110.
At the end of the day today, INTC broke above the channel between 104 and 110.
This breakout is a pattern that I like.
I would Buy INTC on any unchanged or up opening in the morning.
I would place my stop midway in the channel at 107 �.