The width of the channel is based on the high or low that is the furthest from the linear regression. The trend is up as long as prices rise within this channel. An uptrend reverses when price breaks below the channel extension.
The width of the channel is based on the high or low that is the furthest from the linear regression. The trend is up as long as prices Urban outfitters inc analysis within this channel. An uptrend reverses when price breaks below the channel extension.
The trend is down as long as prices decline within the channel. Similarly, a downtrend reverses when price breaks above the channel extension.
Formula The Raff Regression Channel RRC is based on a linear regression, which is the least-squares line-of-best-fit for a price series.
Even though the formula is beyond the scope of this article, linear regressions are easy to understand with a visual example. The middle line is the linear regression extending from the July closing low to the January closing high.
Note that the linear regression is based on closing prices. This makes the linear regression the line-of-best-fit for the closing prices from the July low to the January high. Next, the width is set by determining the high or low that is the furthest from the linear regression early July to mid-January.
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In this case, the next day's low is the furthest and is used to set the lower channel trend line. The upper trend line is then set the same distance from the linear regression as the lower trend line.
Chart 2 shows an example of QQQQ in a downtrend. The late June high defines the width of the channel because it is the furthest high or low from the linear regression. This means the lower trend line is set the same distance from the linear regression as the upper trend line.
Drawing and Signals The Raff Regression Channel can be drawn to cover the existing trend and subsequently define the trend. Once established, extension lines can be drawn to identify the support, resistance or reversal points. An uptrend extends from the lowest closing low to the highest closing high for a move.
A downtrend extends from the highest closing high to the lowest closing low. Keep in mind that closing prices are used when drawing the Raff Regression Channel, but intraday highs and lows are used to set the channel trend lines.
This covers the uptrend so far.
Instead of moving to a new high, URBN broke below the regression channel extension to reverse the uptrend. Notice that the lower trend line was extended to extrapolate the channel. The Raff Regression Channel did not extend further because the stock traded flat and held above its November low into The red dotted line shows the channel extension or the regression channel top.
Conclusions As a channel based on a linear regression, the Raff Regression Channel is well suited for trend identification. The width of the channel depends on the furthest high or low from the linear regression.
As such, spike highs and lows will result in very wide channels that may not capture the true range. When an uptrend starts with a sharp surge, the low a few days after this initial surge is often the furthest high-low from the linear regression. By extension, when a downtrend starts with a sharp decline, the high of this initial decline often the furthest high-low from the linear regression.The Tony-winning revival, starring Tony winners Andrew Garfield and Nathan Lane, ended its limited engagement July Broadway’s Angels in America reached new heights in its final week.
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