Channel lines are straight lines that are drawn parallel to basic trendlines. A rising channel line would be drawn above the price action and parallel to the basic trendline (which is below the price action). A declining channel line would be drawn below the price action and parallel to the down trendline (which is above the price action).Markets often trend within these channels. When this is the case, the chartist can use that knowledge to great advantage by knowing in advance where support and resistance are likely to be.
We see an example of a upward channel in the chart above. During an uptrend, prices will often meet new selling along the upper channel line which is drawn parallel to the rising trendline.
We see an example of a downward channel in the chart above.
We see an example of a upward channel continuing its uptrend and breaking out of its channel in the chart above.