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 Fundamental Analysis?6 Views
Finance a la shmoop what's the difference between a chartist and a
fundamental analyst? okay here's Bob the trader no relation to Bob the Builder [Bob the builder appears]
that is literally his name Bob the trader his parents were bearish on
social security ever really being there for him so you know Bob the trader was
their social security sort of how things work in China today they bet the ranch [Ranch appears]
on Bob and Bob makes bank by trading stocks for silverman slacks Partners on
Wall Street he makes ten million bucks a year by
looking at charts and trading patterns like ascending triangles and double [Trading patterns appear on sheets of paper]
bottoms we cannot lie and triple top like that obB is a chartist and really
kind of an astrologist too and well just kind of weird but he's rich so people [Bob carrying stacks of money]
call him eccentric well Bob the trader is basically the opposite of a
fundamental analyst how so well Bob the trader knows and cares almost nothing
about the companies behind the stocks he trades, he doesn't know what they do for
a living or what their earnings are or what they manufacture or what their
profit margins are or what their gross rates are or who runs them or even how
you spell their corporate name.... well Bob just knows that this week the
stock appears to be starting a major break out and he wants to bet big by [Break out appears on grading patterns]
being long the stock either by owning it or by owning call options with a strike
price right up around here okay so that's Bob the trader all right now meet
Izzy the investor and yep you guessed it that's her real name would have been [Isabel as a baby with her parents]
Isabel but well same deal on the parents and the social security bearishness
thing..Izzy the investor is her parents social security she too makes ten
million dollars a year on Wall Street only she makes like three trades a year
Bob the trader makes that many in an hour
Izzy the investor is a fundamental analyst or a fundamental investor so she
makes big bets on a concentrated handful of stocks which then represent the
investment portfolio she manages and is evaluated again it's like relative to
some index like the S&P500 five hundred so what does a fundamental
analyst care about other than having fund she looks at everything that
comprises real and tangible or meaningful value in a company like all [Man discussing fundamental analysts]
the stuff we described earlier mainly well, the cash it produces or will
produce in the future like if she's paying a hundred bucks share for a stock
what financial returns or value do you get for that stock? ten bucks in real
cash earnings a six percent dividend how our profit margins are they trending up
or down? what about revenue growth our revenues
in fact growing and what about management do they get the biz or are
they just in the rolls for a you know investment bank or golf well how does
the company manage its cash does it buy back stock how well does their product
mesh with the future like are they making operating systems for robots or
paper and pulp so yeah that's what a fundamental analyst does they pick [Stock transfers to Izzy]
stocks using the fundamentals that make up the value of the stock and they really
don't care a whole lot about the charts and yes the key thing is that they get
down to the fundamentals of what makes a company tick especially if that company [Izzy sitting in office and clock ticks]
makes clocks for a living
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