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This is often taken from the original trend line(copy) and added to the peaks(top line), once you have 2 peaks then a channel may exist and you can use it to good use.

The channel in an uptrend is projected up and vice versa for a downtrend, channel lines can be used for short term trading.

This is a chart for Marks and Spencer and the channel line can be easily seen. This is in a clear downtrend so you would short at the top of the channel, stops could be placed above the previous peaks.


channel lines


Once you have a channel line it's possible to set targets. Once a clear channel is established and a break out occurs then you can roughly guess the targets of the breakouts.

This is done by measuring the width of the channel and adding this to the breakout point.