Rising Trend Channels vs. Flat Trend Channels

Understanding the Transition in Stock Price Patterns

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Question

If a stock price that was previously in a rising trend channel suddenly enters a flat trend channel,

Answers

A. most technical analysts would sell the stock on the presumption that it will next enter a declining trend channel. A declining trend channel is a general pattern of price decline, while a flat trend channel is a pattern of unpredictable price fluctuation.

B. some technical analysts would sell the stock in case it will enter a declining trend channel. Most analysts will keep the stock and see what occurs. A flat trend channel is a pattern of price stability.

C. most technical analysts would buy the stock on the presumption that it will soon re-enter the rising trend channel. A rising trend channel is a general pattern of price increase, while a flat trend channel is a pattern of unpredictable price fluctuation.

D. all technical analysts would sell the stock on the belief that it will almost certainly enter a declining trend channel. A declining trend channel is a general pattern of price decline, while a flat trend channel is a pattern of price stability.

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Explanations

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A. B. C. D.

A declining trend channel is a general pattern of price decline. A rising trend channel is a general pattern of price increase, while a flat trend channel is a pattern of price stability. Most technical analysts would keep a stock that has changed from being in a rising trend channel to a flat trend channel because of the possibility of it re-entering the rising trend channel. If the stock price breaks out on the downside, then the analysts would take that as a sign of an incipient declining trend channel, and sell the stock.

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