Channeling technique is the most basic and key part of technical analysis.
It consists of two parallel lines which connects a series of highs and lows. It helps to gauge the overall direction of trend which is very crucial to know in order to take a valid position. Apart from that, channels act as a significant tool to know the crucial resistance and support levels which helps the traders to have profitable trade setups.
Below is the latest hourly chart of crude which depicts the importance of channels:
As shown in above chart of crude, since December 2014 prices are intact within the blue downward sloping channel. Channel has worked brilliantly here thereby showing important support and resistance levels. Blue arrows are the support levels which indicate prices may found support at the lower line of channel whereas red arrows are resistance level where one should look for the selling opportunity once we get the negative confirmation.
Even Elliott wave theory suggests importance of Channels. “The Commodity Waves Short Term Update”covers research on MCX Gold, Silver, Copper and Crude with applied Elliott wave counts on daily as well as short term charts with basic technical tools. Traders can use this report as a guiding tool for short term as well as medium term trend. For more information visit Pricing page