Descending Channel Example, First Solar (FSLR)

The following stock chart of First Solar (FSLR) offers a great example of a descending channel. Descending channels are a basic form of technical analysis spotted commonly in up-trends and are considered bullish as they can make for a strong entry point when the stock breaks out to the upside.

Note: this chart of First Solar (FSLR) is a seven month daily stock chart:

1. The blue "1"s show us how FSLR stock formed its descending channel during mid February through mid March.

2. The blue "2" shows us when FSLR stock finally made the push out of the descending channel and closed on higher than average volume. This sparked a run of 100 points or 50% as the stock ran from $200 a share to $300 a share in less than a month.

3. The purple "3" shows us how First Solar broke above $300 resistance and made higher highs. This was the start of a new uptrend (refer to support and resistance examples here and here for more information).

4. The purple "4" is where the new uptrend reversed and the stock fell back into its base under $300 a share. A very bearish sign and the signal for investors to get out of the stock.

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Comments

  1. Posted by Matt on August 27, 2008 at 10:08 pm

    Great post Blain, this helps alot thanks!

  2. Posted by Matt on August 27, 2008 at 10:09 pm

    :mrgreen:

  3. Posted by Matt on August 28, 2008 at 9:45 pm

    Blain, next you should post a "ascending" channel which I assume is bearish right?

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  1. [...] offer and example of a bear flag or what is known as an ascending channel (view a example of a descending channel). This is formed when the stock is already in a downtrend and forms a channel to the upside which [...]