A channel breakout occurs when price moves decisively outside a well-defined price channel (formed by parallel support and resistance lines), indicating a shift in market behavior. When price breaks above the upper channel, it signals strength and bullish momentum, showing buyers are willing to pay higher prices beyond the previous range; a break below the lower channel reflects weakness and bearish momentum. Channel breakouts often lead to strong directional moves because they mark the end of consolidation and the start of a new trend phase, especially when supported by good volume or follow-through candles.