Channel breakouts.
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Hey everyone, Joshua Martinez here with tradersagency.com, and welcome to this week’s idea. Today we’re going to talk about channels breaking out, and how to potentially trade them.
Okay. So what is a channel? So essentially what ends up happening is, when the markets move, they traditionally will move in waves. They’ll make higher highs and higher lows on the way up, or lower lows, lower highs on the way down. And oftentimes, the market will create boundaries, and these boundaries will highlight where the market’s form low and where the markets form high. Now, of course, it’s not as pretty as how I drew it here, but ultimately this is for educational purposes.
Now, you’re going to see when the market begins to break out that’s what’s called a breakout. Now, how do we trade that? Well, oftentimes some people will buy it right at the breakout, but I don’t like doing that because sometimes this will happen. Sometimes the market will come up and then come right back down. So that’s never a good idea to buy and then you kind of get tricked. So what I like is, I like to let the market breakout, retest, because I’m a big believer that the markets will U-turn at, on, and/or around the same price point. So you can see this angle, U-turn, U-turn, U-turn what once formed highs and pushed the market down, will be the area that pushes the market up. And that provides a buying opportunity when you can look to buy that, U-turn.
Now, why do we bring this up? Because we’re seeing this with light crude oil. So light crude oil, we had this consolidation range where the market formed an equal area of resistance. So U-turn, U-turn, U-turn, U-turn, U-turn, U-turn, U-turn, all right here. This blue line monitors for the market forms highs.
Now, this bottom blue level is as low. So you have a U-turn, a U-turn, a U-turn. Now, you notice how this market has now broke above the resistance level, the top of the channel. And well, what I’m looking for is for the market come right back down to form a low, higher thank this low, at the area where it normally U-turns. So you have a high, you get a high, get high, get a U-turn, a U-turn, U-turn, that could be the future U-turn. So I’m going to look for the market to fall a little bit, hit support, look to see if buyers can take control, counter and line break, and look for the surge up. And that next surge is where I’m going to be looking for some opportunities according to the research.
All right everyone, this is Josh Martinez, and we’ll see you next week.
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