The technician will often draw a line parallel to a trend line to depict the trading range of the market. The trading range between the trend line and the line parallel to it is called a channel. A channel helps to define the trading range of the market. Examples of channel lines drawn from horizontal and diagonal support and resistance lines.

Channels can be drawn in the following manner. A diagonal support line is drawn through the lows in late August near 91.60 and September near 91.80. A parallel resistance line is obtained by drawing a parallel line through the high, between the two lows, which define the diagonal trend line. The parallel resistance line is drawn parallel to the trend line, through the high at 92.10 in September. The parallel line drawn from a support line becomes a resistance line, and helps to define the uptrend by projecting where resistance may develop in the uptrend. Notice how the market finds resistance at this line in October and December.

A parallel support line drawn from a resistance line would emanate from the first immediate bottom or support point, and define the first channel. A resistance line may be drawn of March 91 soybean meal, from the top near 198 in October to the second top near 188 in December. A parallel support line may be drawn parallel to the resistance line and through the low between the two tops near 176 in November. A parallel line drawn from a resistance line becomes a support line and helps to identify where support may develop in the downtrend. Notice how the market finds support in December and January between the 161 and 168 area.

Parallel horizontal support and resistance lines may be drawn just like parallel diagonal lines. A series of horizontal lines can be drawn on October 90 live cattle. The 7350 level is a support area, and a parallel resistance line drawn off the first top in March at 7450 becomes an important resistance level. Once 7450 is broken in May, it becomes an important support area in July. The 7650 line becomes the next important resistance level and, once broken, turns into an important support level in August.

Channel lines provide the technician with an indication of the possible trading range of the market. This helps the trader obtain a better idea of where support and resistance areas might appear.