Fly Paper

The major feature of this chart is the multi-line channel running through the middle (1). I called this channel the Fly Paper channel, because stocks generally get stuck in this channel, when they are trying to move from a bullish to a bearish trend, or from a bearish to a bullish trend. If the visualization of getting stuck in Fly Paper does not work for you, then think of this channel as a huge mountain range or deep valley in which the market participants are going to have to cross before a new trend can take place. In most cases, they don't make it unless a major fundamental change in the condition of the stock has occurred.

When prices are above the channel, we look to buy the dips (2).

When prices break the channel, we look to sell the rallies (3 & 4).

 And And last but not least, we also track, just how far a stock is likely to move in one day, or one week using an indicator called Average True Range. And in this example, the stock will move an average range of $3.90 per week.  

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