Triangle Pattern

Symmetrical triangle 

The symmetrical triangle is mainly considered to be a continuation pattern that signals a period of consolidation in a trend followed by a resumption of the prior trend. It is formed by the convergence of a descending resistance line and an ascending support line. The two trendlines in the formation of this triangle should have a similar slope converging at a point known as the apex. The price of the security will bounce between these trendlines, towards the apex, and typically breakout in the direction of the prior trend.

If preceded by a downward trend, the focus should be on a break below the ascending support line. If preceded by an upward trend, look for a break above the descending resistance line. However, this pattern doesn't always lead to a continuation of the previous trend. A break in the opposite direction of the prior trend should signal the formation of a new trend.



Symmetrical Triangle Definition

A symmetrical triangle is the most common triangle chart pattern. It is comprised of price fluctuations where each swing high or swing low is smaller than its predecessor. This coiling price movement creates a structure of a symmetrical triangle. As a symmetrical triangle is forming, trading activity diminishes along the way until the apex of the triangle is reached. Many technicians believe that if a stock is rallying prior to a symmetrical triangle, the stock will eventually breakout to the upside. Conversely if a stock is falling prior to a symmetrical triangle forming, the stock should continue lower. Both of these assumptions are wrong. Symmetrical triangles provide little, if any indication as to which direction the stock will ultimately breakout. Remember from the above definition, there is a lack of volume and price movement which creates a coiling pattern, therefore it is simply impossible to assess which way a symmetrical triangle will inevitably breakout.