The channels are one of the most important pieces to underdstand the market behavior, not only under the Elliott Wave technique, but also as traditional technical analysis.
Its importance stands at its simplicity and at the same time for it's early signals that can provide.
In this chart:
If you look at momentum (MACD) we can imply that the down trend will continue as the lack of divergence show us.
Therefore if the downtrend shoud remain, the odds are in favour of a pullback to show some retracement, and given the pace needed for the channel, this retracement should be similar at least in one of the lenghts of the previous retracement: price or time.
Once this retracement be ended, then we will have valuable information again from the channel: If the retracement exceeded the boundaries of the channel, the downtrend is deteriorated and its odds to continue in the downtrend diminished.
If the retracement failed to touch the channel's up boundary the trend will seem really strong and accelerating
And if the price bounce from the channel's up boundary, the target will be shown by the down boundary.
Its importance stands at its simplicity and at the same time for it's early signals that can provide.
In this chart:
If you look at momentum (MACD) we can imply that the down trend will continue as the lack of divergence show us.
Therefore if the downtrend shoud remain, the odds are in favour of a pullback to show some retracement, and given the pace needed for the channel, this retracement should be similar at least in one of the lenghts of the previous retracement: price or time.
Once this retracement be ended, then we will have valuable information again from the channel: If the retracement exceeded the boundaries of the channel, the downtrend is deteriorated and its odds to continue in the downtrend diminished.
If the retracement failed to touch the channel's up boundary the trend will seem really strong and accelerating
And if the price bounce from the channel's up boundary, the target will be shown by the down boundary.