Linear Regression Channel

The Linear Regression Channel is created by drawing parallel lines above and below the Linear Regression trendline using two standard deviations.

A Linear Regression Trendline is a straight line drawn through a chart of a security’s prices using the least squares method.

The bottom channel line indicates support and the top channel line indicates resistance. Prices extending outside of the channel may suggest a trend reversal.

Linear Regression Channel

Chart courtesy of Prophet Financial Systems (www.prophet.net)