Price Channel

In the context of technical analysis, when price swings between two trendlines, a price channel have been configured. Both the lower and higher trendlines are considered, while the upper trendline is equivalent to resistance, and the lower trendline acts as a support level. Since supply and demand forces dominate the price fluctuations, drawing channels help traders to trade by channels strategy. The price channel indicates ideal entry or exit points on the chart: Near the upper trendline zone, is proper to sell due to the prediction of a fall in price, and likewise, near the lower trendline zone, tend to buy with the hope of rising.
The price channel efficiently identifies the breakout when security price breaches either the upper or lower boundaries. On the other hand, the more time the price touches and tests the levels, the more valid and stronger they are. When price keeps bouncing off the trendlines, more traders make decisions based on them.

Therefore, the price channel can serve two purposes:

Identifying the potential trading opportunity (buy/sell) in different time frames.
Identifying the price breakouts where the price is close to trendlines.

Types Of Price Channel

Three types of channels are common as three types of trendlines is existed:

Descending Channel: A descending channel is visible when the general price swing in a downtrend. The upper trendline should go through the lower highs, and the lower one connects the lower lows. It is also known as the " Bearish channel " among technical analyzers.
Ascending Channel: A ascending channel is formed when the general price swing in an uptrend. The upper trendline connects the higher highs, and the lower one goes through the higher lows. The '' Bullish channel '' is also another technical phrase for that.
Horizontal Channel: A horizontal channel is shaped when the price swings neither up nor downtrend and fluctuates between a support and resistance level.

Drawing Price Channel

The price channel is an extension of

trendlines

, and the process of finding and drawing is also similar to them. By taking a wide look at the price chart, try to find a fluctuation in the price pattern. Regardless of the type of trend (Uptrend, downtrend or side-way trend), follow the following steps to draw the channel:

Draw the main trendline: For an uptrend, it is always traced BELOW the price and connects to the higher lows. The main trendline is traced ABOVE the price in the downtrend and goes through the lower highs. It is highly recommended to find a valid main trendline to stabilize the following strong channels.
Draw the second trendline: If it is an uptrend, the higher highs, and if it is a downtrend, the lower lows trendline act as the secondary trendline.
Now, You have a clear price channel on the price chart.

NOTE: Not necessarily channels should be formed of parallel trendlines.
In the following price chart, examples of the price channels are demonstrated.

Skyworks solutions Inc, Daily chart (2020-2022)