Triangle – Technical Analysis Continuation Pattern
The first continuation pattern in technical analysis commonly found is the triangle pattern. The types of triangles that can be seen are symmetrical, ascending, descending, and expanding. These patterns are usually short term in duration and are classified as near term or intermediate patterns.
Lets look at the features for each.
- SymmetricalÂ triangles – minimum requirement is four reversal point since it takes minimum 2 points to draw a basic trend line. Most triangles have 6 reversal points. In a symmetrical triangle consecutive peaks are lower than the prior peaks and consecutive troughs are higher than the previous ones. Prices should breakout in the direction of the trend if its a continuation triangle somewhere between a half to three quarter points of the horizontal width from the base of the triangle to the apex. If the price action continues within the triangle beyond the 3/4th point the triangle loses its purpose and prices will continue to consolidate beyond the apex. The easiest method to measure the distance the price should travel after the breakout is by drawing a parallel line to the baseline.
- Ascending triangles – this is similar to the symmetrical triangle but it can be seen that the buyers are more aggressive since the lower line is rising. The acceding triangle is therefore bullish. Buyers are looking to initiate their positions aggressively. To measure the price objective from the breakout point chartists use the volatility of the price pattern from the breakout point. To do that simply take the measure of the widest points in the pattern and then project that from the breakout point.
- The descending triangle is a mirror image of the ascending triangle but considered as a bearish pattern since the pattern indicates that sellers are more aggressive than buyers. A close below the lower line signals a breakout. The measuring technique and breakout point is the same as the ascending triangle. Volumes in these patterns work in the same manner – they are low while trading is contained within the pattern but high on the breakout.