Chapter 11
Transforming Channels into Forecasts
IN THIS CHAPTER
Getting to know channel drawing
Discovering breakouts
Finding out about the regression channel
Estimating ranges with pivot point support and resistance
A straight-line trendline that extends into the future suggests where the price may go, but only in the general neighborhood. You expect future prices to cluster around a linear regression line, for example, but you don’t always know how to think about the outliers. It’s not realistic to try for a pinpoint forecast, but you can aim to draw a range of probable futures prices. Range refers to the high-low scope of prices over a number of periods, generally weeks and months.
In this chapter, I describe the straight-line channel and its forecasting capabilities. I show you how to build a straight-line channel forecast and outline how to interpret the information you see on the chart. I also talk about using pivot point analysis to draw horizontal support and resistance.
Diving into Channel-Drawing Basics
A channel is a pair of straight-line trendlines encasing a price ...
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