Tutorial on Ascending Channel Chart Pattern

What is Ascending Channel Chart Pattern?

It is also known as Bullish Channel pattern as the price is moving up. It consist of two trendline parallel to each other having points forming higher highs and higher lows hence resulting in bullish channel or upside channel. The price is confined between the two trendlines.
It consist of the following:

a. Ascending Upper Trendline: Also known as the channel line or secondary trendline. This is drawn in parallel to the main trendline. It should have atleast two consecutive points forming higher highs. More point in the trendline indicates more strength in the pattern. The main trendline acts as a resistance in ascending channel pattern.

b. Ascending Lower Trendline: Also known as the main trendline or primary trendline. It is called so because it is the one which determines the trend. It serves as an support in this pattern. It should also have a minimum of 2 consecutive lower lows point. More points indicates more validity.

Breakout: It can occur in any direction upside or downside. If the breakout is in downside direction, it indicates that the uptrend is over and bears have taken over bulls and indicates a sell signal. However if the breakout is in upside direction it indicates further buying activity by the buyers and indicates a buy signal.

Volume: Like other chart pattern volume do play a vital role in reaffirming the pattern. In ascending Channel pattern there is increse in the volume as the pattern advances. After a breakout one can see a decrease in the volume activity.

Price Target: One can roughly put a price target after a breakout, and it should be the height of the channel, however other indicators have to considered as well like MACD, Relative Strength Indicator (RSI), etc,.

Duration: Channel pattern Formation takes from a few weeks to many months. Longer the duration are considered to be more reliable than the short duration one.

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