Trading Channeling Stocks

Channeling stocks or stocks that go up and down in a tight range often frustrate investors.

Ever heard of buy low, sell high phrase? Well, trading range bound stock can be great short term money making opportunity by shorting and going long within the range.

A channel forms when stock price bounces up from support line and then drops back to near/or support line after hitting the resistance line. You can draw a parallel line connecting the top and a line connecting the bottom, rather like drawing trend lines to see the channel.

There are 3 types of channelling stocks or rolling stocks some may say:

  1. Ascending-Stocks bounce up and down the channel in a an uptrend.
  2. Descending-Stocks bounce up and down the channel in a downtrend.
  3. Horizontal-Stocks bounce up and down support and resistance level in a horizontal trading range.

Trading Range Bound Stocks

Here are a few ways of trading rolling stocks

  1. Go long just above the high of the 1st bar, when stock bounce up from support line.
  2. Go short just below the low of the 1st bar when stock bounce down from resistance line.
  3. Go long when stock breakout of the channel to the upside
  4. Go short when stock breakout to the channel to downside
Oh, don't forget put a stop loss to protect yourself in case the analysis is wrong.

Channeling stocks appear on all time frames including intrady. I normally use point 1 and 2 for short term like a few days to weeks and prefer trading horizontal rolling stocks. The chart below shows a good example of this strategy.

channeling stock

You can use this strategy for spread betting, CFD trading, options, and covered call options if you are a bit conservative and want to protect the downside.

How To Find Rangebound Stocks To Trade

You use technical analysis filter to scan stocks to trade. The one I used before is Telechart/Worden and the first 14 days are free. Here are my stock scans setting if you want to use the software.

Rangebound Stocks Scanner From Ramp
I came across this software that can scan channeling stocks , known as Bob Charts Scan, as well as stocks that is about to bounce off support and trend lines.

You don't need to write any formular, but just click on the pattern you want and select from drop down menu on the data source.

It can scan End Of Day Data Freely from Yahoo Stocks And Forexes.

It can also scan data from Telechart to find those stocks for you.

It can even scan real time data from " Meta Trader "

This software is ideal if you only want to get in and out of the trade for a short time only.

So if you don't want the hassle of writing a formular for scan, you can use this tool.

Click Here For Your Ramp Channeling Scanner

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