Channel Interpretaion

This is a discussion on Channel Interpretaion within the First Steps forums, part of the Reception category; Me again, boy are you guys going to be busy This is something I've been pondering for a while. I've ...

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Old Jun 22, 2005, 8:06am   #1
5 Posts
Joined Jun 2005
Channel Interpretaion

Me again, boy are you guys going to be busy

This is something I've been pondering for a while. I've seen some posts that imply if you are not careful you are in danger of getting your interpretation to fit with your wishes, or, put another way, you see what you want. This seems quite reasonable but I suspect is a little tricky to totally avoid for the inexperienced, such as me, especially when it comes to technical analysis, which the consensus is as much 'art' as 'science'.

To the point. Take SEO chart one. On the data available to EOD 2/6 I can draw what I think is a legitimate channel. If these support/resistance lines are carried forward two weeks it gives us a range in the 33/25 area.

However in chart 2 you can see that 3 days latter support was breached and 3 days after that it closed below support. Support now becomes resistance.

But with the additional data on chart 3 I can get a totally different interpretation with a slightly different channel. Now support is holding and it 'may' climb back up to test resistance. Projecting these lines forward gives us an area of 26/34, not to dissimilar from above. So which is 'right' or are they both 'right'. I am inclined towards the second channel as this more closely follows the Bollingers.

Incidentalley the divergence on volume, significant? (Please no flames )

Anybody willing to set me straight?

Cheers, tightone.
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stanelco-chart1.jpg   stanelco-chart2.jpg   stanelco-chart3.jpg  

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Old Jun 22, 2005, 10:25am   #2
Joined Mar 2005
Try applying the fibo price levels tool.
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Old Jun 23, 2005, 3:08am   #3
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Joined Nov 2003
Channels are usually best drawn off of the extremes and you simply ignored the spike off the bar.

A good book on channels can is Channel Surfing by Michael Parsons which is available from But I have to admit that I am a little biased here since I wrote it.

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Old Jun 23, 2005, 3:30am   #4
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Joined Jun 2005
tightone started this thread Reversal,
thank you for the clarification I will watch out for that in future. Also I will look your book up when I get back to UK.

trdr, I've never used fibonnaci tools as I don't have them on my charting package. Maybe thats something I should bear in mind for the future.

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