Got this question from William, member of our community.
Just like to check whether the below is ok? Do let me know any where I have done wrong. AUDJPY weekly chart is down trend ED (equidistant channel) with a WR near bottom of ED. There are still space to the top of the ED.
Based on this observation, William wants to go long AUDJPY.
AUDJPY “There are still space to the top of the ED”
Best practices to go with equidistant channel
If you decide to do your analysis with channels, don’t stop at one.
Illustration of multiple equidistant channels
- Use a combination of different channels to frame AUDJPY, provide context.
- Each trend line has potential to act as support or resistance.
- Price action reacting to each trend line verifies its usefulness/significance.
- In this chart, AUDJPY big picture is still down based on beige, green channels.
- Short term trend may be up based on blue channel.
- It appears that the big beige channel drawn from points A and B as well as its accompanying lines 1 – 5 exert a strong influence on the pair.
- Not all lines are relevant at this moment but could play a role in future as they did in the past.
- AUDJPY is framed inside a diamond with C, D as potential support and E as potential resistance.
- We did a video on the best way to draw equidistant channels here.
- Here’s one example of what you can do with equidistant channels “Straits Times Index levels forecast by parallel trend lines” i.e. looking for levels as well as forecasting.
- Note that there is no absolutely correct way to draw trend lines. Drawing them improves over time with experience.
- Note also that even in this example, many more channels can fit it. It takes some practice to select the right ones. Don’t try to squeeze too many. Too many channels in one chart be confusing.
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Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005.
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