Bearish Channel

A bearish channel is a continuation trend pattern. The bearish channel is arranged by two parallel lines that frame the downward price trend. To certify a line, there has to be at least two points of contact with the price. The more contact points it has, the more the trend line is stronger and their breakout will give a stronger buy signal.

The bearish channel one of the most used chart patterns. You can find it on every time frame. There is no theoretical target in this pattern. The movement can continue as far as the upper band is resistance.

Here is a graphical representation of a bearish channel:

Bearish Channel

It isn’t a good idea to take a long position at the contact with the lower band. Actually the trend might continue along the lower band. Also the movements towards the upper band are correction movements into a downward trend and as a result are less powerful.

To avoid false breakouts, draw your trend lines based on high and low points of candlesticks and not their body. The breakout will often occur at the 4th point of contact.

The more the upper band acted as resistance, the more the breakout will be violent.