The Keltner Channels are a series of three separate technical indicator bands that are derived from a stock’s moving averages and its average true range. Our team uses the Keltner Channels as a technical indicator to determine at any given time whether a stock is overbought, oversold, or reasonably priced. When our team uses the Keltner Channels, we use the general or default parameters which are listed below. The Middle Keltner Channel band is a stock’s 20-Day EMA (exponential moving average). The Upper and Lower Bands of the Keltner Channels are formed by doubling a stock’s ATR (average true range) and either adding it to or subtracting it from the stock’s 20-Day EMA.

The Middle Keltner Channel serves as an indicator of roughly fair technical value for a stock. The Upper Keltner Channel serves as an overbought indicator when a stock is trading at or above it. The Lower Keltner Channel serves as an oversold indicator when a stock is trading at or below it. When our team is looking to enter a new trade, we will use the Keltner Channels to assist with better timing our entry point. For ‘bullish’ trades, we will wait until a stock is trading in the Keltner Channel ‘Buy Zone’, which is defined as below the Upper Keltner Channel. For ‘bearish’ trades, we will wait until a stock is trading in the Keltner Channel ‘Sell Zone’, which is defined as above the Lower Keltner Channel. For any type of trade entry, entering the trade near the Middle Keltner Channel is preferred, however not required, nor is it always possible.

Thanks,

Chuck Hughes