Further gains are seen but these are curtailed by two consecutive unchanged session closes – the 2nd of which (E) closes inside the Keltner channel upper end and provides a sell signal.

The resulting decline is not an extensive one however and it is the failure at the midpoint of the Keltner bands, F, which gives another intraday Buy signal.

Finally this rise fails at the top of the channel with subsequent losses reinforcing the potential for a double top (E & G).

Figure 2 is a GBPJPY 2 Hourly Chart.

Technical analysis, keltner channel GBP JPY.png

Point A gives the initial signal here with a close above the top of the Keltner channel. This does result in gains but these turn out to be limited with candle price action giving some upside warning before prices plunge back inside the channel.

For our trading perspective this change to a negative bias is confirmed by the failure at the mid-point of the channel at point B. This gave a cautious sell signal.

This selling pressure accelerated on a close below the bottom band at C with the market steadily declining.

Point D provided a buy signal with a session close back inside the channel but this proved limited as did a buy signal at E. It must be remembered that this style of trading was never take place in isolation. Confirmation in the form of other indicators is always sought and in this case buy signals must be taken with significant caution as the descent of the channel clearly shows that the underlying trend if negative.

Closing once again below the bottom of the channel increasing bearish momentum and once again this results in further losses – point F.

This time there is a more significant rejection of the lows (in fact this turns out to the absolute base in the time period covered) and the strong close back within the bands is another intraday buy signal – G.

This happens one more time with a Sell signal H swiftly followed by a Buy at I. This buying at similar price levels and with closes inside the line is added evidence that a significant low is in place. The market duly rose to the top of a Keltner channel that was then beginning to rise.

Figure 3 shows a Weekly Dow Jones chart

Technical analysis, keltner channels Dow Jones index.png

To show that using the Keltner channels as a trading tool is not confined to intraday we now look at a Weekly Dow Jones chart.

Point A closed outside the bands and generated a buy signal. Prices traded to higher levels for the next four weeks.

A close back inside the channels, B, signalled a sell signal which was proved correct over the next 3 weeks until…

Point C showed a firm rejection of the mid-point of a rising channel and this buy signal saw the market rise steadily over the following 11 weeks with an additional buy signal generated at D, a close above the upper end of the Keltner line.

E then saw a close within the bands signaling a negative bias that led to the Dow trading all the way lower, in 2 weeks, to the bottom of the bands.

Here a rejection of this key level (F) gave another Buy signal that lead to gains over the subsequent 6 weeks, including an unmarked rejection of the midpoint of the channel once again.

Point G does show a false acceleration to buying pressure but that is followed the next week with a close beneath the upper band of the channels – a Sell signal that 5 down weeks.


Keltner Channels are, like some many technical indicators, trend following but with the added facility to suggest acceleration in either direction and also, when used more creatively, as failure points. While it is beyond the scope of this short article, it is also essential that Keltner Channel signals for trading are used in conjunction with other technical indicators such as Candle Patterns or Stochastics rather than employed in isolation.

Alan Collins