Upside Price Channel

Stocks on the upside often trade in an upside price channel that is defined by recurring highs and lows. The upper boundary of the price channel is defined by a straight line that connects the highs and the lower boundary connects the recurring lows. The boundaries are parallel.

Prices tend to remain within the lower and upper boundaries. But when a price bubble forms, prices temporarily move above the upper boundary. But they usually correct and move below the upper boundary. And when prices collapse, they may temporarily fall below the lower boundary.

The chart of BorgWarner (BWA), a global supplier of drivetrain and engine parts for automobile, busses, trucks and heavy equipment, shows an upside price with the parallel upper and lower boundaries.

Related Articles:

Downside Price Channel
Price Patterns - Resistance Levels Are Barriers to Price Upsides
Price Patterns - Support Levels May Constrain Price Downsides

Posted November 12, 2007.