Keltner Channel is a volatility-based indicator placed on either side of the stock’s price and helps determine the direction of a trend. The Keltner channel uses the average-true range (ATR) with breaks above or below the top and bottom barriers that signal a trend continuation.
The middle line is an exponential moving average (EMA) of the price. The upper band is usually set two times the ATR above the EMA, and the lower band is set two times the ATR below the EMA. These bands generally expand and contract as Volatility is measured by ATR expands and contracts.
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