What Is An Ascending Channel Chart Pattern?
In technical analysis, an ascending channel pattern, also known as a "bullish channel" or "rising channel", is a bullish continuation chart pattern that forms on the price charts when the price action of a financial market moves within a range or channel as it increases higher in a bullish trend.
It is constructed of two parallel rising lines which mark the swing highs and swing lows of the ascending channel.
Ascending Channel Pattern Components
In order to identify an ascending price channel chart pattern, there will need to be two components visible on the price chart.
The 2 components of an ascending price channel chart pattern are:
- An rising resistance level: This is a rising resistance level that connects the higher swing highs in the prices together.
- A rising support level: This is a rising support level that connects the higher swing lows in the prices together.
Drawing an ascending channel price channel chart pattern involves combining these components of the rising support and the rising resistance levels together.
Ascending Channel Chart Pattern Examples
Below are visual examples of the ascending channel chart pattern.
Example Of An Ascending Channel Pattern In The Stock Market
In the price chart of Disney stock above, an ascending channel pattern formed.
There is a clear level of rising support where the price bounced off and a clear level of rising resistance where the price reversed from.
Example Of An Ascending Channel In The Forex Market
In the daily price chart of USD/CAD, an ascending channel pattern formed. The price traded in an orderly bullish manner within the price channel as it increases in price.
Example Of An Ascending Channel On A Shorter Timeframe Price Chart
In the chart of Soybean futures, an ascending channel pattern forms on the 1-minute price chart.
Day traders and scalpers will use these lower timeframe price charts to trade these bullish channel patterns when they form.
This is an example of an ascending channel on a shorter timeframe price chart.
Example Of An Ascending Channel On A Longer Timeframe Price Chart
In the weekly price chart of the Nasdaq 100 Index, an ascending price channel formed. The price of the market moves higher while trading within the price range of the bullish channel.
This is an example of an ascending channel on a longer timeframe price chart.
How To Find Ascending Channel Patterns
The methods for finding ascending price channels in the markets are:
- Manually scrolling through financial charts: Traders can find ascending channels by manually browsing through the price charts of markets and trying to find them on the charts.
- Using a technical analysis tool to scan: Traders use technical analysis tools like a chart pattern scanner to automatically find these patterns in the markets.
- Reading chartered market technician (cmt) tweets: Following chartered market technicians on Twitter can help traders to find price channels in the market. CMT's will regularly post chart patterns they find on their Twitter feeds.
Ascending Channel Pattern Benefits
The benefits of the ascending price channel patterns are:
- It helps provide a clear and logical structure to the market: An ascending price channel can help identify and understand the bullish price action in the market.
- It offers a low-risk buy entry point: An ascending channel offers traders the opportunity to buy into a bullish trend from a very low-risk area.
- It can help with setting profit targets: Traders can use the rising resistance level of the ascending channel pattern as a profit target area for any buy trades.
Ascending Channel Pattern Limitations
The limitations of ascending price channel patterns are:
- They can fail: An ascending channel can fail to stay within the price range or channel and cause traders to get frustrated as they attempt to trade within the range.
- It does not work during volatile periods: When the market gets more volatile during a news announcement or other events, it can make the levels marked by the channel unreliable.
Frequently Asked Questions About The Ascending Channel Pattern
Below are frequently asked questions about the ascending channel chart pattern.
Is An Ascending Channel Pattern A Reversal Or Continuation Pattern?
An ascending channel pattern is a bullish continuation pattern that indicates that the price of a market will continue to increase within the bullish channel or price range.
What Does An Ascending Channel Pattern Tell You?
An ascending channel pattern indicates that the price of a market is moving upward within a price range and a bullish uptrend.
It indicates that the price will continue to increase over time until the price breaks down from the ascending channel pattern.
What Price Chart Timeframes Can An Ascending Channel Pattern Form On?
An ascending channel pattern can form on any timeframe price chart from a short-term 1-minute chart all the way up to longer-term weekly and monthly price charts.
How Long Does It Take For An Ascending Channel Pattern To Form?
The length of time an ascending channel pattern takes to form will depend on the timeframe of the price chart used.
On a 5-minute price chart, an ascending channel pattern can take approximately 7 hours or more to form.
On a 30-minute price chart, an ascending channel pattern can take 30 hours or more to form.
On a daily price chart, an ascending channel pattern can take 60 days or more to form.
What Is The Difference Between An Ascending Channel And A Descending Channel Pattern?
The differences between an ascending channel pattern and a descending channel pattern are:
- It's direction: An ascending channel pattern forms in a bullish direction and upward price movement whereas a descending channel pattern forms in a bearish direction and downward price movement in the market.
- It's signal: An ascending channel pattern is a bullish signal in the markets whereas a descending channel pattern is a bearish signal in the market.