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1996issue C031-12

Constructing trendlines and channels from explicit swings

A trendline, price-channel, or horizontal-zone begins with a named swing-selection rule. The same rule later decides whether price has broken the structure or only nicked it.

  • An uptrend-line connects a sequence of significant lows while price is forming higher lows and higher highs. A downtrend-line connects a sequence of significant highs while price is forming lower highs and lower lows.
  • When significant swings are hard to locate, horizontal lines through recent highs and lows map a sideways zone, with the lower boundary treated as support and the upper boundary treated as resistance.
  • A price-channel is a trendline plus a parallel companion line. Placement is approximate, and the practical test is that the majority of price action remains inside the band.
  • Swing anchors can be chosen with a zigzag-filter, a high-low-window, or a linear-regression-midline, so a later break is judged against the same construction rule.
Entries in this reading3 entries
Current trackPrice channel77 readingsTrendline128 readingsSupport and resistance170 readings

Start with a stated swing rule

Editorial reading: treat every trendline, price-channel, and horizontal-zone as a construction that begins with an explicit swing-selection rule. A later break is then judged against that same rule, not against a line that has been redrawn after the fact.

A trendline is a straight line through a chosen sequence of swing highs or swing lows that states the working direction of price. The archive workflow names how those swings are selected before the line is drawn.

Uptrend and downtrend lines

An uptrend-line is constructed by connecting a sequence of significant lows and is used when price is forming higher lows and higher highs.

A downtrend-line is constructed by connecting a sequence of significant highs and is used when price is forming lower highs and lower lows.

Swiss franc June 1995 holding a long-term uptrend

June 1995 Swiss franc futures climb from the mid-76s in January to the high-88s by early spring, then pull back to the low-82s in May and hold. The rising reference line is the long-term support drawn through the two circled swing lows; price stays above it for the whole window. Weekly levels were read from the daily bar chart’s cents scale; the final 85.85 print is the 19 June session quoted on the screen.
June 1995 Swiss franc futures climb from the mid-76s in January to the high-88s by early spring, then pull back to the low-82s in May and hold. The rising reference line is the long-term support drawn through the two circled swing lows; price stays above it for the whole window. Weekly levels were read from the daily bar chart’s cents scale; the final 85.85 print is the 19 June session quoted on the screen.CME Swiss franc June 1995 futures · Daily bars, weekly samples · 1995-01-16T00:00:00.000Z to 1995-06-19T00:00:00.000Z

Digitized from daily OHLC bars on a labeled 74–89 cents scale. Samples are weekly and rounded to the nearest half-cent except the printed 19 June close. Steeper short-term uptrend lines on the same figure are omitted so the long-term line stays readable.

Horizontal zones when swings are unclear

When significant swing highs and lows are hard to locate, horizontal lines through recent highs and lows map a sideways zone. The lower boundary is treated as support. The upper boundary is treated as resistance.

Support is the lower constructed boundary where buying interest is expected to appear if the structure still holds. Resistance is the upper constructed boundary where selling interest is expected to appear if the structure still holds.

Parallel lines make a channel

A price-channel is constructed by drawing a line parallel to an existing trendline so price is expected to travel between the two boundaries. The upper line is treated as resistance and the lower line as support.

Channel placement is approximate rather than exact. The practical construction test is that the majority of price action remains inside the band.

Three rules for choosing anchors

A zigzag-filter can select trendline anchors by suppressing moves smaller than a chosen percentage or point threshold. A swing is recorded only after price has already traveled that amount.

A percentage zigzag-filter is preferred to a fixed-point filter because a one-point move may not scale with changing volatility. A 5% filter can erase nearly all usable swings, while a 0.15% filter can mark almost every fluctuation.

A linear-regression-midline can be fit by least squares between a chosen start and end point, such as the most recent 20 days. Parallel lines around that midline can form a channel.

A high-low-window marks the lowest low or highest high of successive fixed-length windows, then connects those marks. Windows of four to six days are suggested for shorter-term lines and windows of six to fifteen days for longer-term lines.

Judging a later break

A slight penetration of a constructed trendline is not treated as a decisive break unless price closes through the line or remains through it for several days.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
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19981-3 pp.Next on Price channelFifty percent retracement as a channel regime testTrendlines mark each impulse start and end so the 50% retracement of that range can be plotted as support or resistance.
All readings on this track · 55 readings
  1. 1988Constructing price channels from trendlines
  2. 1988Three-point curved trend channel construction
  3. 1988Least-squares construction of channel trendlines
  4. 1988Three-zone price channel from quadratic smoothing
  5. 1989A variable-sensitivity stochastic built on three-sigma bounds
  6. 1989Close-minus-average oscillator for channel extremes
  7. 1989The six-stage hunt as a critique of one-click heroics
  8. 1990Fair-value gaps and a copper moving-average channel
  9. 1990Diversify markets, not systems, to cut trend-system variance
  10. 1991Constructing trendlines, price channels, and close-based breakouts
  11. 1991Constructing seasonal-cycle overlays with channel confirmation
  12. 1993Lag-compensated exponential trend channel construction
  13. 1993Constructing a lead-lag filter and price channel as one stack
  14. 1993Three stochastic warnings still need price-channel confirmation
  15. 1993Lead-lag smoothing for weekly trend-channel construction
  16. 1993Constructing zero-net-lag price channels
  17. 1995From a downtrend-line break to a regression channel
  18. 1995Validated trendline and price channel construction
  19. 1995Constructing price envelopes from averages, volatility, and regression
  20. 1996Constructing trendlines and channels from explicit swings
  21. 1998Fifty percent retracement as a channel regime test
  22. 1998Close-based channel rails as daily scenario maps
  23. 1999Constructing support, resistance, trendlines, and price channels
  24. 2001Cycle composites, price channels, and two-sided signals
  25. 2001Testing horizontal price channels with stops and scale
  26. 2002A two-stage momentum-shift and price-channel process
  27. 2002Wave-by-wave channel construction for Elliott counts
  28. 2002Affine channels as reusable trade hypotheses
  29. 2004Stress-test seasonal windows across regimes, then add channels
  30. 2004Regime permission from trendlines, channels, and range edges
  31. 2004Weekly-average and price-channel states on sector depositary baskets
  32. 2005Oil services catch-up after channel resistance breaks
  33. 2005Constructing a volatility-normalized cycle index
  34. 2005How a Darvas channel becomes a complete entry and exit procedure
  35. 2005Clustered Fibonacci and channel levels in news-driven forex
  36. 2005Treat a consolidating currency market as a time-frame problem
  37. 2005Channel walls that flip roles or recapture price
  38. 2006Stacking candlesticks, crossovers, and price channels
  39. 2006Failed uptrend channel breakout left the euro rangebound
  40. 2006Constructing a Wilson relative price channel from a range-bound strength index
  41. 2007Range bars change when a Bollinger squeeze counts as a breakout
  42. 2009One testable SPY procedure for a price channel, a trend rule, and a seasonal overlay
  43. 2010A gold-miner channel plan from value to false breakouts
  44. 2010A multi-timeframe channel from value to an overvalued zone
  45. 2010Asymmetric price channel construction for congested markets
  46. 2011Phasing many cycles at once with nested envelopes
  47. 2012Constructing adaptive horizontal price channels
  48. 2014Confirming support with trendlines, channels, and retracements
  49. 2015News-sentiment confirmation for support, channel, and volume tests
  50. 2015A three-layer permission stack: moving averages, a price channel, and weekly levels
  51. 2016Entropy-diff as a regime switch between trend following and a price channel
  52. 2017Competing rulers on a pound chart after Brexit
  53. 2017Test consolidation channel breakouts as one procedure
  54. 2020Constructing late-trend longs with a price channel, gap breakout, and trailing stop
  55. 2025Using IBM's multi-year price channel as a breakout teaching case
By fieldTrend and channels181 readingsBy year199680 readings
All 77 readings tagged Price channel
Also on Price channel5 readings
1988Three-point curved trend channel construction1998Close-based channel rails as daily scenario maps1999Constructing support, resistance, trendlines, and price channels2004Regime permission from trendlines, channels, and range edges2005Channel walls that flip roles or recapture price