The Home Depot, Inc (HD) has sold off considerably over the last six months, and in the last three months created a downtrend channel.

Channels provide an opportunity to capitalize on various types of trades. You can short into resistance, buy into support, and or play a resistance/ support break. Usually on a support/resistance break there is some kind of continuation pattern that forms and indicates the channel will fail.

If you spot of continuation pattern forming, I would play it safe and wait for a channel break before allocating any capital.



Andy Swan is co-founder and head trader for DaytradeTeam.com. To get all of Andy's day trading, swing trading, and options trading alerts in real time, subscribe to a one-week, all-inclusive trial membership to DaytradeTeam by clicking here.