Channels are a chart pattern highlighted by two parallel lines displaying support and resistances during a certain period of time. They can be trending or ranging depending on the market sentiment being decisive or indecisive. In this blog, you will learn that channels are best paired with Elliott Wave as dynamic support and resistances of price in the NewWave System. This is mainly relevant so you understand as you’re learning what it is when you see us use channels in our technical analysis as the majority misuse channels.
Channels compliment Elliott Wave very well because they provide you with an expectation from price and when you know every possible scenario the market can move, nothing can surprise you. In the NewWave system, we use channels to indicate impulsive and corrective structures, typically to have an expectation from an Elliott Wave count to a certain degree which displays the dynamic support and resistances of price.
We often see parallel channels in corrective wave structures the most such as abc’s, wxy’s and wxyxz’s which can still be traded within the range but when price breaks out of a parallel channel, it’s typically assumed to be impulsive and usually pulls back to retest the top of the trendline for a 4th wave shown below. These ideas of staying in the channel being corrective and breaking out of a channel being impulsive can provide guidance with Elliott Wave and also shows the importance of the incline of an impulse wave.
In summary, channels are incorporated in the NewWave system as an indication to provide confluence when determining wave structures to be impulsive or corrective. The NewWave Traders have found all the best components to pair up with Elliott Wave, making our system the most reliable and effective system out there. Learn more about the NewWave system in my brand new workshop where I share two rare known truths and a proven framework that I used to become a successful trader that 95% of traders don't know here: FREE Trading Workshop (tradethewave.com)