Triangles (ascending, descending and symmetrical)
Triangles are continuation patterns in which highs and lows converge: the price compresses before breaking out with a larger move.
In the ascending triangle the highs are at the same level and the lows rise: it usually precedes an upside breakout. In the descending one the lows are flat and the highs fall: it usually anticipates a downside breakout. In the symmetrical one the highs fall and the lows rise: the price generally breaks out in the direction of the previous trend.
How to spot it
You draw two lines: one through at least two relative highs and one through at least two relative lows. The type of triangle depends on the slope of the two lines. The pattern is complete when the price closes beyond one of the two lines; the indicative target is the height of the widest part of the triangle, projected from the breakout point.
Worked example
A stock stalls three times at €80 while the lows rise from 72 to 75 and then to €77: it's an ascending triangle. The widest part is 80 − 72 = €8 high: if the price closes above €80, the indicative target is 80 + 8 = €88.
How to read it
The breakout is more reliable if it comes before two thirds of the triangle and with rising volume. If the price keeps swinging all the way to the apex, the pattern loses meaning.
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