Traders use Regression Channel studies to select possible trade entries near support or exits at resistance. The study is also very useful for identifying price breakouts and minor or major trend reversals.

Most trending markets move incrementally higher or lower between defined lines offering support and resistance.

Few price moves go straight up or down for long without slight pullbacks while profits are taken and new buyers enter the fray. We can use such predictable behavior to our advantage as the action unfolds. Regression Channels help uncover rhythmic moves in the market as prices ebb & flow like waves on the ocean.

Each trader chooses to enter markets differently. Aggressive types take strong buy signals whenever they emerge. Conservative traders prefer to enter pullbacks in an uptrend or rising channel. Waiting for price action to bounce from it's descent to prove a new advance has begun is also a prudent choice.

Daily chart - JDSU)

Here we watch JDSU stair-step down the chart over a three-month period before finally switching course to rally once again. Bold short-term traders who nibbled on buy signals through the downtrend as prices reached lower support were rewarded in some examples. Of course, all entries should be decided upon many indicators that converge to suggest a buy - this being one of those.

Waiting for the stock to break this downtrend on strong volume is the signal prudent traders look for to enter new trades.

(Hourly chart - JDSU)

Looking at an hourly chart we see three possible entries in JDS Uniphase during mid-June before the minor up wave breaks and leaves it's regression channel. Meanwhile, a new down move forms to offer at least two entries with prices at support. Note how the breakout early July returned inside the channel and bounced off old support from the lower line intraday on July 7th.

(Daily chart - VTSS)

VTSS again offers swing traders two or three entries for quick profits while bouncing within the descending channel. A break from there in early June was just the move patient investors were waiting for to enter new uptrend trades.

(Hourly chart - VTSS)

Vitesse Semiconductor Corp descends within a clear channel from $88 to $68 price levels. Entries for aggressive traders were possible near support but conservative traders might elect to wait for price breakout above resistance line on high volume and other positive signals to prove downtrend may be broken.

(Daily chart - NASDAQ)

NASDAQ's breakout of the long descending channel in late May on rising volume signaled a sentiment change had occurred. A look at broad-market behavior is the first step for entering new plays on individual issues.

Regression Channels are valuable technical tools that offer high-odds trade entry or exit in addition to identifying price action and trends. Long-term charts will indicate the overall market direction for conservative traders to follow. They may opt to buy positions near bottom reversals as stock prices break convincingly above the upper resistance line with confirming strong volume and other indication.

Aggressive or short-term traders can look for technical signals to converge as price action nears the bottom support line of it's channel. Using close stops (if possible) and careful entry via short-term chart signals should offer the best chance for profitable results.