The Technical Triangles



Having covered major reversal pattern in our previous posts, we are now all set to learn about continuation patterns.

Continuation Patterns are the ones in case of which the price after moving sideways for some amount of time continue the trend prior to the consolidation. So, suppose the price is in downtrend then after moving sideways for some time continuation pattern will lead it to continue to downward movement and if it is in uptrend the occurrence of continuation patterns on charts will make it continue the uptrend. 

So, in this post we will be focussing on Technical Triangles. There are three types of technical triangles namely symmetrical, ascending and descending. Let's have a look at the following figure and check how each of them look like:

 


1. Symmetrical Triangles: 

Symmetrical Triangles usually represent continuation pattern. 

Notice at the figures above the price stops in an actual trend and then moves in waves for some amount of time and then continues the old trend after the breakout or breakdown. During the consolidation the support will be rising and the resistance will be falling as represented by above charts. The pattern gets completed when the price breaks out on either side. 

The point where the resistance and support lines meet each other is known as apex. There is also a time limit which helps us to spot the breakout, its usually between 2/3rd to 3/4th of the triangle starting from the base which is marked as point 1 in above charts. So, suppose the length of the entire traingle comes out to be 15 days then the possible time when the stock will give a breakout is 2/3 of 15= 10 days or 3/4 of 15 = 11 days i.e. around 10-11 days.

Setting Targets:

Targets after breakout are set by measuring the widest portion or the base of the triangle from the point of breakout as can be seen from the following chart:



Now whenever you spot such patterns on charts you should be able to guess what's coming next. Check out more real life example of symmetrical triangles:



The price broke out the symmetrical triangle and achieved the targets there on in case of Sun Microsystems.



The above is an example of bearish symmetrical triangle, in case of which price broke downwards and achieved the targets.



This charts shows how a symmetrical triangle will look like at point of breakout.

So, to sum up following points need to be taken care in case of symmetrical triangles:

1) Symmetrical triangle represents a continuation pattern, means the trend prior to the occurence of this pattern will continue after breakout

2) The support line will be rising upwards and the resistance line will be falling.

3) The point where two lines meet each other is known as apex and the breakout duration is usually 2/3 to 3/4 the size of the triangle

4) The target is set by measuring the base of the triangle from the point of breakout, towards the direction in which breakout has occured.

Hope I was clear with symmetrical triangles. In our next post we will be covering ascending and descending triangle pattern and the methodology to filter stocks for such patterns.

Also check: Head & Shoulders Reversal Pattern

How a small action increased my net profits by 800%

Happy Investing
The Stock King




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6 comments

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Anonymous
AUTHOR
March 31, 2015 at 5:36 PM delete

Hello sir
Please share your views about Ahmed nagar forging for short term? It seems that bullish reversal pattern starts from now. Pl suggest can we enter this scrip now?

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March 31, 2015 at 6:39 PM delete

not yet bro wait for few more sessions for confirmation...........................

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vinay tej
AUTHOR
April 15, 2015 at 10:37 PM delete

hi abhi, upto which point is the length of the triangle? is it from point 1 to apex point in the first figure?

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April 16, 2015 at 7:35 AM delete

the triangle generally breaks out between 2/3rd to 3/4th of the length of the triangle measured from point 1 to apex....................

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vinay tej
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June 14, 2015 at 10:19 PM delete

hi abhi,how do we calculate the number of days from point of breakout to the apex point,, as the break out happens much before the apex point and there is no stock activity in between those points?

Is the length of triangle(i.e. no of days) an exact figure or an approximated one?

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June 15, 2015 at 8:07 AM delete

vinay tej ji its a general rule on what happens most of the time nothing can be 100% sure in technical analysis as its an art of forecasting....................... for calculating the no of days just draw the triangle and check out the duration it continues for .........

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