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The upper Keltner band is the mid line plus a multiple of ATR. Price near or above it can signal strong upside moves.
The upper Keltner band is the mid line plus a multiple of ATR. Price near or above it can signal strong upside moves.
The calculation:
Upper Keltner = Keltner Mid + (Multiplier × ATR) Typically: Upper Keltner = 20-EMA + (2 × 10-period ATR)
What the upper band represents:
- Volatility-based boundary: Based on Average True Range, not standard deviation
- Smoother than Bollinger: ATR produces less jagged band edges
- Dynamic resistance: Adjusts with price level and volatility
How to interpret:
- Price at upper band: Strong momentum; trend likely intact
- Breakout above: Exceptional strength; potential trend acceleration
- Walking the band: Sustained strong trends ride along upper band
- Reversal from band: May indicate short-term pullback
Trading applications:
- Trend confirmation: Price consistently near upper band confirms uptrend
- Squeeze breakout: Bollinger bands expanding through Keltner signals volatility expansion
- Entry timing: Pullback to mid line in uptrend may offer entry
- Target setting: Upper band can serve as profit target
Keltner channels are popular among trend followers because the ATR-based construction makes them less susceptible to whipsaw than standard deviation bands.