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Friday, May 20, 2011

Triangle


There are 4 kinds of triangles in technical analysis:
Triangles usually form over a period between three days to three weeks. They take longer to form than flags or pennants and will often form after a major price move.


When a pattern develops that displays a series of peaks that are progressively lower and a series of higher troughs, it generally indicates that indecision exists in the market. Usually, the price will break out of the pattern with an equal amount to the base of the triangle and in the same direction as the original trend. Just like with symmetrical triangles, the move from the apex to the equal base of the triangle can be expected.


The two trend lines should indicate at least four points of contact before a break out can occur. In these types of patterns, with a horizontal trend line, the direction the break out will follow can be predicted. For example, buyers are generally more aggressive than sellers when an ascending triangle is present and each attempt made to pull back will stop at earlier stages.

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