Linear Regression Channel is built on base of
Linear Regression Trend representing a ussual
trendline drawn between two
points on a price chart using the method of least squares. As a result, this
line proves to be the exact median line of the changing price. It can
be considered as an equilibrium price line, and any deflection up or
down indicates the superactivity of buyers or sellers respectively.
Linear Regression Channel consists of two parallel lines, equidistant up and
down from the line of linear regression trend. The distance between frame
of the channel and regression line equals to the value of maximum close
price deviation from the regression line. All price changes take place
within Regression Channel, where the lower frame works as
support line,
and the upper one does as resistance line.
Prices usually exceed the channel frames for a short time. If they keep
outside of the channel frames for a longer time than usually, it forecasts
the possibility of trend turn.
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