Classic triangle patterns don't fit easily
into simple continuation or reversal trading strategies. Depending
on their unique characteristics and position within the larger trend, they
may foretell either event. While certain variations lean toward a favored
breakout, the artistic symmetrical triangle has zero bias
to either outcome as the formation suggests a state of perfect balance.
Sharp traders closely watch the tug and pull within the developing pattern
to identify the eventual winning play.
Trading power within well-formed triangles
intensifies as they shift from range into breakout mode. When
price finally surges into directional trend, a powerful vertical thrust
quickly develops. While false moves occur at these apex points, triangles
have a higher degree of reliability than most breakouts.
The angle of inclination defines this pattern's
identity. Ascending triangles rise again and again
toward a ceiling resistance level. Symmetrical triangles
surge rhythmically across both sides of a horizontal axis dividing the
formation right through the middle. The bearish descending triangle
bounces weakly off bottom support.
High volatility marks the birth of new triangles.
But as they approach their termination points, activity decreases sharply.
This highlights a major risk in successfully trading these patterns. Should
no ignition spark the expected breakout, the chart may flat-line, with
price meandering endlessly in sideways motion. Traders caught in this phenomenon
are advised to close positions and move to more fruitful endeavors.
||Ascending Triangles -
Buying pressure builds as price bounces repeatedly off a ceiling of horizontal
resistance. A sharp thrust through this zone signals the breakout. Watch
for any failure at the 3rd high, triggering a possible triple top reversal.
- Noted for their central pivot axis, these patterns can yield powerful
moves. Take no initial bias and examine buying at the 2nd and 3rd bottoms.
The ability to hold well above the 1st low on good accumulation stokes
the breakout fires.
||Descending Triangles -
Rally power fades as the bull's energy is spent. An illusory double bottom
invites one last batch of weak hands just before a sharp break signals
major selling. If the bears fail, buy the 1st move above the trendline
of the declining tops.