Keltner Channel

 

Keltner Channel VS Bollinger Bands There are those that often confuse the BB and KC but they do act differently in terms of reaction to price. The big difference is the Bollinger band is calculated using a standard deviation while .

A move above is considered overbought. Trends often start with strong moves in one direction or another.

BREAKING DOWN 'Keltner Channel'

A Keltner Channel is an envelope channel used in technical analysis to chart bands around security price candlestick patterns. It includes a moving average center line and two boundary bands.

Thus, a candlestick pattern moving substantially above the resistance trendline is a sign to sell and a candlestick pattern moving substantially below the support line is a sign to buy.

The methodology above is the standard for most Keltner Channels however it is important that traders understand how their technical system is charting Keltner Channels. Some Keltner Channel calculations will include a center trendline drawn from an exponential moving average with upper and lower trendlines drawn using the average true range. What is a 'Keltner Channel' A Keltner Channel is an envelope channel used in technical analysis to chart bands around security price candlestick patterns.

Fakeout is a term used in technical analysis to refer to a situation Short-term traders seek volatility because of the profit potential. Discover how to find volatile stocks and use technical indicators to trade them. Traders can benefit from experimenting with envelopes, which help spot trends after they develop.

These four stocks are in upward sloping trend channels and have recently pulled back toward the bottom of the channel, providing a buying opportunity. These stocks are moving within well-established trend channels and have recently pulled back toward channel support, presenting a potential buying opportunity.

These stocks are rising within trend channels and flashing a buy signal with the price near channel support. These two stocks are in long-term rising price channels. Currently trading near support, an upside move indicates another wave higher. A handful of commodity stocks continue to offer short-term trading opportunities as they move higher within a trend channel.

These stocks are currently trading near the bottom of trend channels but moving higher, presenting a buying opportunity. Technology and consumer discretionary ETFs have fallen to channel support.

Buying opportunity or time to sell? Again, not a complete day trading system until you add your exit strategy and trading money management. Two possible exit strategies are profit objectives and trailing stops. If you don't know where to place your initial Stop, try getting some ideas from my Stock Day Trading System page. Areas of price support and resistance generally work well for initial stops. Of course, their disadvantage is that everyone knows where they're at.

Two consecutive price bars close above channel. MACD Histogram is falling at bar close. You'll notice on the chart above at around So, you'd have four options at that point:. In addition to a new high, price had just broken a trendline not drawn on chart , and the MACD Histogram had a double divergence. One could make a case for a long entry here instead of a short entry using the histogram for divergence, as in the Divergence Trading Strategy.