Market technicians look at channels as guides to tell them where the price of a stock might be headed. More than just a pair of parallel lines, a channel can be a strong indicator of future direction. Today’s big stock charts showcase such channels.
When channels trend upwards, that’s positive. As they say, the trend is your friend. But when the trend is downwards, that’s typically not a good sign.
The position of the stock within the channel and other factors will weigh into the overall equation, as you’ll see in the following three big stock charts.
With a word of caution to always trade carefully, here are three big stock charts that have downward channels.
Twitter (TWTR)
With so many people on lockdown and spending their time on social media, you’d think Twitter (NYSE:TWTR) stock would be doing well. But does the first of our big stock charts support this theory?
- The halfway point in the channel is near $30 and the stock isn’t quite there yet. Look for a breakthrough past that level as confirmation of bullish momentum.
- The double-bottom pattern formed at $22, so that’s a support level. Double-bottoms tend to be bullish, so more movement to the upside is a possibility.
- However, Thursday’s red candlestick on a bright green day in the overall market isn’t what the bulls were hoping for. They’ll definitely want to see a green candle printed on Monday.
Roku (ROKU)
Streaming is a major entertainment trend and Roku (NASDAQ:ROKU) stock is one way to take a stake in it. Watching the chart will help traders to determine whether this streaming sector upstart can provide them with strong returns.
- The midpoint of the downward channel is $100 and the stock hasn’t reached it yet. Bulls should watch that level carefully to see if the stock closes solidly above it.
- The volume has been anemic lately, which isn’t encouraging for long-biased traders. They’ll want to see green candlesticks with strong volume soon.
- If you do choose to take a position, it’s probably best to take profits at the top of the channel. After all, it’s a falling channel and the overall trend still isn’t in the bulls’ favor.
Nokia (NOK)
Nokia (NYSE:NOK) stock has provided decent returns over the years, though it has also gone through some rough patches. Still, maybe it’s time to put some tech-enhanced power into your portfolio with this stock.
- The last of today’s big stock charts shows that NOK stock is very slightly above the halfway point in the channel. It’s also holding $3 quite nicely, so that’s certainly bullish.
- This one has been trending downwards for a while. Playing the channel with a long position at the lower trend line is a dangerous game to play.
- Thursday’s candlestick is a shooting star, which is generally considered bearish. A reversal to the downside could be imminent, so be cautious here.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
