Even if you’ve never dipped a toe in water you can still swim the channel, the Fast Money way.
Channel trading simply involves trading a stock that moves up and down in predictable patterns. When you chart the movement the trend line looks like a sound wave.
The lowest level is called support and the highest level is called resistance. And the area between these two lines is referred to as the channel. The more times the price touches and rebounds from support or resistance without breaking higher or lower, the more significant and reliable the channel becomes.
Channel trading simply involves trading a stock that moves up and down in predictable patterns. When you chart the movement the trend line looks like a sound wave.
Evergreen Solar is a great example of a channel pattern, says Guy Adami. Look at it over the last six months and you can see the highs and low. Make sure you buy on troughs and sell on rips.
The South Africa ETF (EZA) is another great example, adds Pete Najarian. It’s trading right around resistance which suggests it could go higher.
But remember, cautions Tim Seymour it’s purely a technical measure.
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Trader disclosure: On July 2, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (BTU), (C), (GS), (ITNC), (MSFT), (NUE); Finerman Owns (GS); Finerman's Firm Owns (SUN), (TSO), (VLO), (MSFT), (PM); Finerman's Firm Owns SPX Index Puts; Finerman's Firm And Finerman Own (C) And (C) Leaps; Finerman's Firm Owns (GE) And (GE) Puts; Finerman's Firm Is Short (XME) And Owns (XME) Puts; Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM); Najarian Owns (AAPL), (CHK), (HPQ), (TSO), (XLF); Najarian Owns (MER) Puts; Najarian Owns (SLB) Calls, (WM) Calls, (YHOO) Calls, (ZRAN) Calls ;Seymour Owns (AAPL), (F), (MER), (MSFT), (TSO); Seygem Asset Management Owns (EEM), (TTM)
