This is the trading playbook where the charts do the talking and every session makes you a better trader. Hello everyone. My name is Lawton Hope here at Verified Investing and welcome to another Trading Playbook Saturday episode. In today's episode, I have something very, very special. We're going to be talking about parallel channels. But before I get any further, guys, please consider liking and subscribing to the Verified Investing YouTube channel. It really, really helps us a lot and allows us to continue to pump out more free content for all of you. And before I forget, our sale, our financial freedom sale, is live now until July 12th. Enjoy 40% off all of our courses, including my very own course, the Zero to Trader in 60 Minutes Crypto Edition. But with that being said, guys, let's hop into the play call. And this is the play. It is a parallel channel. So, when you're thinking about trading, right? >> [clears throat] >> What is a parallel channel? Well, parallel channel, for instance, would be essentially a trend line that you can draw that also connects on the other side, creating a parallel, right? >> [clears throat] >> So, I have this beautiful trend line up here, but there's an actual matching trend line to the other side, the other side of it, right? And similar to regular trend lines, up sloping trend lines, on a break of a up sloping trend line, it's bearish. On a break of a parallel channel, it is bearish. And it's bullish the other way. So, I'll write this down. Okay. >> [clears throat] >> Break up sloping equal bearish. Break of down sloping bullish, right? It just kind of indicates momentum shift. And the best [laughter and clears throat] way that I can explain on how to draw trend lines is is kind of like a uh square and a rectangle, right? What is a square? It's uh where the sides and the top are equal, right? In length. And a rectangle is the sides are equal to each other and the top and bottom are equal to each other. So, every single uh square is a rectangle, but not every single rectangle is a square, right? In the same way, every single trend like every single parallel channel has a trend line, but not every single um trend line is is a part of a parallel channel, if that makes sense. Let me show you and just show you guys so it's a little easier. >> [clears throat] >> So, the S&H I drew this nice up sloping um parallel channel. I'm going to show you exactly how I drew that. So, first thing you do is you draw a nice trend line on the downside. I'm using these pivots and we'll see that hey, they connect perfectly here. Now, we did attempt to break down from it, but we never closed below this trend line, nor did we confirm. So, for me it's still valid. And what are you kind of expecting on these parallel channels. Well, you're expecting some level of support on the bottom and resistance at the top of these >> [clears throat] >> parallel channels. Another additional thing you're looking for is chop all in and around the midline, what's called the midline of this parallel channel. Now, in this case you'd consider this bearish because it is up sloping, but you want it to break first. So, let's say it didn't break and you're just watching this for a potential trade. Well, what do you do? Right? How can you trade this parallel channel if it's not breaking like it's not doing right now? Well, there's a couple ways you can trade this. You can use the top line here, the top trend line of the parallel as resistance. So, let's say the SMH continues to push up, get higher, you can look for a short around there. And look for a move potentially to the midline of the parallel. Right? You can see that each time so far that we've gone ahead and pushed up into this top [clears throat] of this parallel channel, we've come down and retrace back down at least to the midline of this parallel channel. Um but another way you can look to enter this for a short is look for a break, just like a trend line. Let's say it comes down, you can short it on the break or on a retrace back to the bottom of this parallel channel. And I'll show you guys a couple more examples. Right? >> [clears throat] >> With MU and I'll go ahead and just draw this here. Right? Boom, you could draw kind of like a trend line like this and connect the top here. But, you can see that it connects Excuse me, twice over here. But, it's not my favorite one. It's not my favorite because these pivots aren't hitting it at separate times. So, regardless you have a nice up sloping trend line, right? So, what are we looking for? In this example, you're looking for a close below the parallel channel, confirmation below, and then look for a move lower. Same thing here with AMD as I'm going to copy this and bring it over. We're looking for something similar. We're looking for a breakdown. You can see a support here, supports here, and support here. But, I want you to stop and take a second and tell me why this parallel channel isn't perfect. For reference, I can go back to this Micron and this SMH. What is different from this AMD parallel channel from the other parallel channels? In this case, it's the fact that there's only one point of data on the top side. So, another rule that we're going to be adding is we need at least two points side. Okay? We need at least two points of data on each side. We only have one here. So, that doesn't mean that AMD isn't bearish if this bottom of this parallel channel breaks. No, certainly not. In fact, what did I say earlier? It's still a valid trend line, right? Still a valid trend line. You see it hit here, pierced, but recovered. Tap it again, unable to break down from it. And then again right here, bouncing off of it, basically perfectly, right? So, it's although it's not exactly a parallel channel, it's still a nice trend line that you can play on a break and a retrace. I'll show you guys a few more. And these are everywhere. Parallels are absolutely everywhere. Apple, same thing. You see we have two points of data on each side. We have these points here, points here, points here, and these points here. And what did I say about potentially playing this? Every single time you hit the top of the parallel, you fall down at least pretty much to the midline. There's a 10% drop here. There's another 10% drop here. So, it's not just on the break that you can look for a short. In this case, you can look for a short on the top. But what if it's bullish? What about the inverse? All right, what about a down sloping parallel channel? All right, I'm going to skip over that, and we'll look at APP which did play out. Well, you can take a look here and see how it played out. In this case, you could say, "Well, look, it's a down sloping parallel channel." And if you want to pull this over, I know it's thundering outside. I apologize for that. Pull it over here and be like, "Oh, well, it kind of hits there." Well, not really. It's simply just a trend line. In this case, I would just remove this and just take it down. And say, "Hey, look." Right? However I draw it, however I choose to draw this, it's simply just a breakout play of this down-sloping trend line. And finally here on Tesla, a good example of a down-sloping parallel channel that's actually looking to potentially break. You can see very clearly the levels that it hits. Boom. Boom. Boom. Boom. Boom. Tons of different levels here for a potential long. Right? Inversely, right? Let me go ahead and paste this here. It's because this break of this down-sloping is bullish, you could also enter at each time that it comes back and it hits the bottom of this parallel, if it's down-sloping. Remember, if it's down-sloping, we generally are looking for a place to go long. So, you can go long at the lower end of a down-sloping trend line, and you can go short at the upper end of a up-sloping trend line. All right? The last one I want to talk to you about is Reddit. Right? Which kind of looks interesting, right? You could say, "Wait, it's looking to potentially break out." It's hitting the top of this parallel. Right? But what would I say? I say when we're looking at stocks that are up-sloping in an up-sloping parallel channel, what do I say? We're looking for an area to short. And where are we looking to short? At the top of that parallel channel. So, in this case, I would look to potentially initiate a a short down here, up here, and look for a move down to around the midline around $180 on Reddit. All right. So, that's all I have for you guys today. I hope that was very helpful in understanding what parallel channels are and how they're similar to trend lines and how they're not in some ways and how we can kind of use them. In tomorrow's episode, I'm going to give you three trading setups that you can use to hopefully make some money over this upcoming week. Thank you so much for watching. Again, please like, comment, and subscribe. Let me know what TA pattern you want me to cover next. And don't forget my brand new course Zero to Trader in 60 minutes crypto edition is out and 40% off. So, if you ever thought about wanting to get into cryptocurrency, now is your chance to do it for the low. Hope you guys have a great rest of your day and I'll see you next time. Bye, guys. That's the trading playbook. Today's episode was your film study. The principle, the pattern, the framework. The application is waiting for you on Sunday. Real setups, real levels, ready before Monday opens. Subscribe to Verified Investing on YouTube. Saturday teaches, Sunday prepares, show up ready.