A triangle is a common technical chart pattern found in liquid markets.
 Types of triangle
There are three types of triangles:
 Symmetrical triangles
Symmetrical triangles are formed by rallies and sell-offs, each smaller than the last. As opposed to the rectangle where both support and resistance run parallel to the x-axis, the symmetrical triangle is marked by sloping support and resistance.
The support line is upward sloping while the resistance line is downward sloping. The lines converge towards each other over time.
Imagine this as a coiled spring, getting tighter and tighter as time goes along. As time moves on and the price range narrows, an event is in the offing. What the event is we can't be certain. It will usually be a breakout and continuation of the prior trend. But it could also be a reversal. One thing which is close to certain is most of the time the move will be explosive. Just as would be the thrust from the coiled spring once it was let loose.
 Ascending triangles
Ascending and descending triangles are a hybrid of the rectangle and symmetrical triangle. In the ascending variety the resistance line is parallel to the x-axis while the support line is upward sloping.
The resistance line represents persistent selling at a set price level. The flat top shows how any potential price advance is rebuffed any time it approaches. Meanwhile, buyers are willing to consistently up the price they will pay as prices pullback.
The ascending triangle will typically break out to the upside as the seller(s) finishes or as buyers overcome the seller(s), or a combination of both.
 Descending triangles
Descending triangles are the mirror image of their ascending cousins. Here one can find a flat bottom support line with a down sloping resistance line.
The support line represents persistent buying at a set price level. The flat bottom shows how any potential price decline is stopped any time it approaches. Meanwhile, sellers are willing to consistently accept less and less as prices rally.
The descending triangle will typically break out to the downside as the buyer(s) finishes or as sellers overcome the buyer(s), or a combination of both.
 Measurement of the move
Just as with rectangles, two methods can be used:
 Depth of congestion
Measure the "mouth" (i.e the wide end) of the triangle and add this on to the breakout level to find an initial price target. So if the mouth was 10 points and a breakout down occured at 100, then you would expect the initial target to be 90.
 Length of prior move
Here the advance or decline from the previous breakout of congestion to current triangle is measured and added on to the next breakout point to find a longer term target. In this instance the triangle represents the centre of a measured move.
e.g A stock congests between 95 and 100 for a few days. It then breaks out and trends up to 130 where an ascending triangle forms, the mouth being between 125 and 135. The price eventually breaks out upwards from the flat triangle top at 135. The longer term target is then (125-100)+135 = 160.
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